September 2, 1998 6:35 PM PDT

Computer City shuts some stores

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CompUSA to buy Computer City

June 22, 1998
CompUSA will shut down approximately half of the Computer City outlets it bought from Tandy now that the $211 million acquisition of its formal rival has been finalized.

The location consolidation comes amid increasing competition among companies that make a living selling computers and computer components. Decreasing margins have prompted a number of these companies to acquire competitors, close outlets and/or reduce overhead.

One retailing giant, Egghead, for instance, recently shifted its business onto the Net and shut forever all of its once ubiquitous outlets.

CompUSA and Computer City were heated rivals in the computer retailing world for a number of years. In recent years, however, Computer City went through a series of mishaps and management changes which weakened it competitively. CompUSA announced that it was buying Computer City in June.

Fifty of Computer City's 101 U.S. and Canadian stores will be closed after liquidating the inventory, CompUSA said. The remaining 44 U.S. Computer City stores and seven Canadian stores will continue to operate, CompUSA said, and be progressively merged into the CompUSA umbrella.

Not including the newly acquired stores, CompUSA, the nation's largest computer retailer, operates 164 stores in 73 metropolitan areas in the U.S.

"We are very pleased with our acquisition of Computer City, which we believe will further CompUSA's position as the nation's premier provider of personal computer-related products and services,'' CompUSA CEO James Halpin said, in a statement.

About 150 positions at the Computer City corporate headquarters have been eliminated, CompUSA said. At the store level, the company said that after liquidation sales are over, CompUSA will "evaluate the remaining store staff and many employees will be offered positions."

"We would like to keep as many (employees) as possible that make sense to keep those stores profitable," CompUSA executive vice president and chief operating officer Hal Compton said in a conference call with analysts. "But when you close 50 stores and you consolidate home offices and are looking for the synergies and savings that come with it, obviously there are going to be some jobs that go away."

Although the integration process will take time, CompUSA will try to quickly implement many changes before the end of November to capitalize on the holiday buying season. The CompUSA name will go up on the outside of the outlets as soon as possible. "While the total conversion of the 44 U.S. stores that will remain open may take 12 to 24 months, substantially all our business methodology and procedures will be implemented within the next 60 to 90 days," Halpin said in a conference call to analysts.

The conversions include "changing the interior and exterior store signage, implementing our merchandise assortment, deploying the Apple store-within-a-store concept, and also (installing) our new entertainment area in every store," Halpin said in the conference call.

 

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