Struggling CompUSA slashes stores

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The future of computer chain stores across the US looks bleak again following news of a further slide in CompUSA’s fortunes. The retail giant last month announced it was closing more than half of its retail sites over the next two to three months to focus on its top performing locations.

 

In a statement, CompUSA said it would close 126 of its stores and would receive a $440 million cash capital injection to help improve the company’s balance sheet, but avoided explaining the source of the investment. The retailer also said it would undergo a radical cost-cutting and restructuring programme.

 

CompUSA, owned by Mexican billionaire Carlos Slim, is now left with a dramatically slimmed-down presence of just 103 locations.

 

The revelation marks a new low for the company, which has suffered a steady decline in outlets, turnover and market share. The company insists the strategy will allow it to focus on its most successful locations but analysts are thinking out loud and questioning whether this is the beginning of the end.

 

Some believe the once-impossible is now a very real possibility, with CompUSA joining the likes of other US computer-focused stores, such as Computer City, Computerland and Tiny, that were all forced to beat a hasty retreat from the US retail landscape.

 

So where did it all go wrong? Many industry onlookers believe the rot set in back in 2003 when CompUSA bought the Good Guys chain of 46 electronic stores for $55 million only to close down all the locations two years later.

 

Many customers turned their backs on what they perceived as CompUSA’s ‘soulless’ stores and the chain suffered a damaging reputation for poor customer care and shoddy quality control.

 

Reacting to disastrous customer feedback, the company acknowledged: "Getting staff is a problem across the board. We need specialised talent; finding it can be a challenge." But paying their staff $6.50 an hour was always highly unlikely to attract sufficiently trained sales staff with expertise in both personal and technical skills.

 

Some industry commentators also believe internet pricing is to blame for the demise of CompUSA, which was founded as Soft Warehouse in Dallas, Texas, in October, 1984. One said: "You can order computers, accessories and electronics from the web for a fraction of CompUSA’s in-store prices – and evidently, most people are doing exactly that."

 

Its absence from the market will create a very real opportunity for many office products dealers as the consumer’s dependence on quality PC support and advice is growing, not shrinking. Intense gross margin pressure, especially in the flat panel television category, has hampered others in this sector, contributing to Circuit City Stores’ announcement earlier in March that it was closing 70 stores.

 

Roman Ross, CompUSA’s recently-appointed CEO, confirmed: "Based on changing conditions in the consumer retail electronics market, the company identified the need to close and sell stores with low performance or non-strategic, old store layouts and locations faced with market saturation.

 

"We understand that our company must make comprehensive changes to better compete in today’s marketplace. Our realignment strategy addresses the steps we must take to increase profitability in the current retail landscape."

 

The future of the chain has been in doubt after a spokesman for multi-billionaire Carlos Slim revealed was thinking of selling up. Last September, an official from his conglomerate Grupo Carso told Reuters that Slim, was seriously considering selling the loss-making business.

 

According to Forbes magazine, Slim is the third richest man in the world, with a personal wealth estimated at more than $49 billion.

 

And at a press conference last month in Mexico City, Slim said that he will now sell the remainder of the CompUSA chain, "if any one will buy it".

 

He added: "We got started on the wrong foot", commenting on his strategy for the company since he purchased it. He admitted making a mistake with management by failing to appoint several key positions.

 

Following the store shutdown announcement, CompUSA realigned its executive leadership team. Gabriela Villalobos was promoted to EVP for sales and operations and will take responsibility for store, services, small business and eCommerce sales. Mike Bryk, a former VP of finance and accounting, was appointed to the board role of CFO.

 

But even now, as over half of the stores prepare to pull the shutters down for one last time, CompUSA has missed a golden opportunity to be customer-friendly. Typifying the stuttering performance that belies its now-critical condition, its final offer isn’t much of a fire sale: Ten percent off everything in-store – and no returns. All eyes are now on Best Buy.