May 15, 2002 4:45 PM PDT

Gateway closes three Country stores

Struggling PC maker Gateway has closed three of its Gateway Country stores, electing not to sign new leases as the old ones came up for renewal.

Last week, Gateway closed a store in Cheektowaga, N.Y., near Buffalo, N.Y. On Monday, Gateway closed stores in Bogart, Ga., and Dearborn, Mich.

Gateway, which opened its first stores in 1996, is scrutinizing store performance when lease renewal comes around, said Gateway spokesman Greg Lund. As they do, the company is deciding whether to renew the leases, relocate the store, or shutter the location depending on how well the store was performing and the renewal terms offered by the landlord.

All three stores that were closed opened in 1997 under a five-year lease. The company has already renewed a number of leases, Lund said.

"We decided not to renew the leases on these three individual stores," said Lund, who added that other stores will be evaluated on a case-by-case basis as they come up for renewal.

The company is better able to track stores' performance since moving to new headquarters last year. Among the features of the new headquarters are its giant video screens which show daily financial results, including those of the best- and worst-performing stores.

Lund said the company is primarily focused on improving performance at its existing outlets but would consider opening additional locations if the timing were right. Gateway has begun carrying inventory of its most popular models, allowing customers to leave with a PC in hand if they wish.

For much of this year, Gateway has embarked on a strategy of cutting prices and sacrificing profits in hopes of rebuilding market share.

The company has said that it is gaining market share in the consumer and small to midsize business segments, but the company's overall share of the PC market in the fourth quarter was roughly flat with the fourth quarter of last year and down substantially from a year ago.

For the past year, Gateway has also been trying to pare its costs through a variety of means, including closing stores.

In January, the company announced it would close 19 stores as part of a broader restructuring that has also seen Gateway exit all overseas markets and slash its work force. In March of 2000, the company said it was closing 27 stores, or roughly 10 percent of the locations.

According to research firm IDC, Gateway had 6.1 percent of the U.S. PC market in the first quarter, compared with 6 percent in the fourth quarter and 8.7 percent market share in the first quarter of last year.

Preliminary figures from market researcher Gartner Dataquest show that Gateway actually lost share in the first quarter. Gateway had 5.8 percent of the U.S. PC market in the first quarter, Gartner said, down from 6.2 percent in the fourth quarter of last year.

 

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