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Merchants Mourn Ultimate Electronics


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.”