THORNTON, COLO. —
Retailers regret the loss of Ultimate Electronics, which began going-out-of-business sales last week after the U.S. Bankruptcy Court in Delaware approved the plan.
The chain, founded in 1968 by Bill and Barbara Pearse and majority-owned by investor Mark Wattles, had filed for Chapter 11 bankruptcy protection in January for the second time in six years after business soured, bills went unpaid, and vendors severed their credit lines.
But unable to secure financing or access its cash collateral to fund operations, the company, which was also partially held by Hewlett-Packard, had no recourse but to dispose its inventory, valued at $86.5 million. Gordon Brothers Retail Partners and Hilco Merchant Resources are overseeing the liquidation, which will leave some 1,500 employees out of work when the chain’s 46 stores are shuttered by April 15.
Merchants said Ultimate, like Circuit City, was another victim of tight credit and the tough economy, although its woes also underscore the challenges facing the A/V specialty channel.
“People have to be well-capitalized and offer a viable alternative, a reason for customers to come to their stores,” observed Rick Souder, Crutchfield’s merchandising executive VP. “Specialty retail is under pressure from mass retailers, particularly in a weak market, which makes it more important for specialists to do more for their customers.
“If you focus on price” — as Ultimate had in its recent marketing — “that’s all you become known for, and it becomes a battle for the lowest common denominator,” Souder said.
To Bill Trawick, president and executive director of the NATM Buying Corp., Ultimate’s demise is “part of the times. If a company does get into any financial difficulty, it’s almost impossible to raise funds. We’re in a very tough environment and if conditions remain unchanged, you have to wonder if this is the last retailer we see shut down.”
More specifically, Dave Workman, executive director/ COO of the Progressive Retailers Organization (PRO Group), and a former president and CEO of Ultimate, believes the company was felled by three main factors: expansion into non-contiguous markets in the Northeast and Northwest; category choices, such as PCs, which is a low-margin business, and major appliances, for which it didn’t have the distribution infrastructure; and stores that were simply too big, a challenge he had inherited as well.
On a personal note, Workman credits Wattles with using his own cash to rescue the company after if first filed for bankruptcy nearly six years ago to the day, and mourns the loss of a franchise that once reached 14 states and $700 million in sales. “I have a sick feeling,” he said. “It’s where I grew up in the business. Out of Good Guys, Ultimate and Tweeter, I really thought it would be the last one standing.”