Rumors fly about a&b sound's future

Ever since BC-based computer manufacturer Seanix Technology purchased retail chain a&b sound out of creditor protection in March of 2005 both companies have been the focus of a great deal of speculation about the fate of the embattled retailer

It’s a law of nature in the CE industry that if you ask seven people for their take on a story in the biz, you will get at least nine different rumors. Sifting them, verifying them, and cross-referencing them with publicly available facts is officially one of my hobbies (although some days it feels like a full-time job).

While it is a fact that since October of last year, Seanix/a&b has turned off the lights at stores in Winnipeg, Saskatoon, Red Deer, as well as the downtown Calgary location, what is less certain is where these closures fit into a bigger strategy.

The “word on the street” as one contact of mine at an unnamed regional discount chain whose name rhymes with “Visions” related to me is that a&b is suspending operations in the prairie provinces, and focusing on retrenching and consolidating their business in the Vancouver/Lower Mainland market.

This is a theme I’ve heard from multiple sources, and has legs for two reasons: one, the Lower Mainland was the “heart” of a&b’s market in the old days, and for 25 years, their command of the retail CE market there was virtually uncontested. As a result, this story plays to the sentiments of old-time fans of a&b sound. Second, the notion that the four remaining stores in Edmonton and Calgary are on the block is a handy stick that managers at competing retailers are using, along with a big fat carrot to entice the few remaining senior store-level personel at a&b to jump ship.

Me, I don’t buy it, and I will tell you why. To keep everything straight, I will put the story in bullet points:
· When Seanix acquired the a&b sound ltd. retail business from former owner Nick Steiner last year, the store locations’ buildings and land remained the property of a&b holdings, the vehicle the Steiner family uses to manage their real estate investments.
· It is a Well-Known Fact that when the Steiners still owned both a&b sound ltd and a&b holdings, the rent that a&b sound stores paid to a&b holdings was at the same time the most significant overhead for the stores, and a major source of revenue for a&b holdings.
· It is another Well-Known Fact that Seanix President Paul Girard felt that the rent being paid to a&b holdings was disproportionate to the quality of the properties.
· Right from the beginning of the Seanix acquisition, Girard was quite public about Seanix’s plans to expand a&b sound coast-to-coast through franchising the brand, whether by selling to entrepreneurial General Managers already on staff, or by attracting outside investment. While there has been no mention in the press since the initial announcements, neither has there been a public retraction of this plan.
· The grand opening of a new Calgary location in South Trail Crossing is inconsistent with the “pulling out of Alberta” story that’s being passed around, not without some gleeful schadenfreude, by rival retailers. In addition, I have been told by multiple sources inside a&b sound that they are still shopping for a West End Edmonton location before they roll up operations at the dilapidated downtown Edmonton store.
· If Girard still plans to franchise the a&b brand, then consolidating stores, and eliminating loser challenged locations prior to launching a franchising campaign is sensible business.

There, does that make sense? Good.

That said, there are quite a few voices in the marketplace that doubt a&b sound’s ability to reinvent themselves and expand across Canada. The first rank of doubters are all the senior managers, sales professionals, and head office category buyers who have bailed from the new a&b sound in the past seventeen months. Ever since Seanix assumed control a year ago last March, a&b has been hemorrhaging senior personnel, myself included (there’s your full disclosure for you).

Joining the chorus of doubters are key players at not only competing retailers, but also vendors and former vendors. A source of mine close to Tony Scafeo, owner of the dominant Calgary chain Soundsaround told me that Mr Scafeo has repeatedly commented that a&b has dropped off of his competitive radar in the last year and a half. In times past, a&b and Soundsaround used to fight tooth and nail for customer’s dollars in the Calgary market, but his managers report that a&b appears to no longer be a factor when customers are shopping the market. Best Buy is now Scafeo’s only major competitive concern, my source informed me.

A number of manufacturers and distributors have ended long relationships with a&b, often citing “a change of emphasis” or “new directions in our marketing.” I can’t name names, because none of my vendor sources wished to comment publicly, but they include one major television maker, a couple of major car audio brands, and one maker of upper-level HiFi equipment.

I need to wrap this polemic up into a tidy bundle. To sum up: quite a few people in the industry believe a&b sound to be struggling. I strongly suspect the store consolidation activity to be an effort to dump onerous leases in marginal locations prior to launching a blitz to attract franchise investment to grow the brand.

An email to a&b sound Head Office asking for comment was not immediately returned.

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