New At rAVe [Publications]: Be Thankful For Big Box Retail

rAVe [Publications]: Be Thankful For Big Box Retail

Sphere: Related Content

I Came Here Not To Praise Circuit City, But To Bury It

Clusterstock's Henry Blodget takes a two-part swipe at both Circuit City's inept management, and his favorite whipping boy, Treasury Secretary Paulson:

Clusterstock: What? No Bailout For Circuit City?

What was the disastrous business mistake that will now cost Circuit City stockholders and bondholders everything and 35,000 employees their jobs?
Not buying enough crap assets to make Hank Paulson come running with his arms full of money.

As droll as that was, if I can be semi-serious for a minute, there were two key factors that contributed to CC's demise.

First, their senior management were absolutely useless. Even if you don't know the first thing about business, you'd really have to exert yourself to have less strategic retail savvy than they.

More importantly, the global credit crunch meant that the supply of eager beaver Private Equity companies with access to shitloads of easy money dried up. Less than two years ago, CC's board rebuffed a $20/share takeover offer (further proof of my first point, above), a high water mark that they would never again come close to.

Without crazed PE money sloshing around the globe, the number of white knights who were capable of turning the company around was, well, zero.

Sphere: Related Content

Circuit City Done, Like Dinner

After a rollercoaster year (rollercoasters mostly go downhill, right?), Circuit City is finished.

Clusterstock: Circuit City To Be Fully Liquidated (CC)

Circuit City's (CC) hopes to ride out bankruptcy have faded: CNBC reports the electronics retailer will be fully liquidated. Its 35,000 remaining employees will lose their jobs.

It appears now that there really is nobody who wants to pick up a CE retailer on the cheap. I used to use the little homemade graphic above just to be mean, but now it's become incredibly apt.

Sphere: Related Content

Also This Week In CE Pro: The Future Of Big Box Retail

CE Pro: 3 Predictions for Big-Box Retail in 2009

Sphere: Related Content

Fry's Electronics Exec Charged With Stealing $65 Million

This story occured while I was taking a little Christmas hiatus, but it's spectacular enough to rehash here.

TWICE: Fry’s VP Arrested For Embezzlement

The merchandising VP of Fry’s Electronics was arrested on charges of embezzling more than $65 million from the chain in an elaborate kickback scheme he used to pay off gambling debts and support a lavish lifestyle.
According to media reports, the Internal Revenue Service has accused Umar Siddiqui of demanding kickbacks from at least five vendors in exchange for placing inflated orders. The payments, which were as much as 31 percent of the cost price of goods, were allegedly hidden in a shell company that paid nearly $18 million to the Venetian Resort Hotel Casino and subsidized a lush lifestyle that included a Ferrari, a penthouse apartment and private flights charted by casinos.
A criminal complaint says Siddiqui convinced Fry’s senior management to allow him to deal directly with vendors in order to save the company commission fees paid to sales reps.

Going into further detail is forensic accountant and fraud expert, Tracy Coenan:

The FraudFiles Blog: $65 million fraud via a shell company scheme

In this case however, the shell company scheme was a little different. The shell company purchased goods at inflated prices from the suppliers, and purchased more goods than needed. The suppliers then split the excess profits with Siddiqui. The kickbacks to Siddiqui allegedly went as high as 31% of the sales price.
Siddiqui was allegedly able to pull off this shell company scheme because he supervised a staff of 120 people who bought merchandise for Fry’s 34 stores in the U.S.
And how did this scheme come to light? Apparently carelessness on the part of Siddiqui. Another executive saw a spreadsheet on his desk which detailed the kickbacks. The evidence was given to the IRS, who looked at Siddiqui’s bank records and found $167.8 million in deposits to the shell company. $65.6 came from 5 suppliers alone.

At the time that the story broke, I got an email from an industry contact who referenced the CE Pro story I had just done, entitled 6 Ways To Profit In 2009:

Hey Lee,
Guess there's a seventh way..
http://www.twice.com/flashVideo/element_id/2140308739/taxid/30414.html


I don't know how common that sort of stuff is now, but used to be a bit ofit on our side of the border.... 31%, Jeez, that's over the top... Storiesfor the book that we can write when we've retired and run away to someuntraceable part of the world...

And the beat goes on.

Sphere: Related Content

a&b sound Files For Bankruptcy Protection Again

It's been a tough year for CE retail. After months of mysterious, inexplicable behavior by the storied Western Canadian retail chain, and plenty of rumors, it's finally official:

Marketnews: a&b sound Files for Bankruptcy

Struggling Western Canadian retailer a&b sound has officially announced its filing for bankruptcy protection.
A note written by MacKay & Company Ltd., trustee in bankruptcy that appears on the company Website (www.absound.ca) indicates that while the organization attempted to turn the company’s business around, it was
unable to do so.

One of my correspondents just asked me in an email, if I think that they’re finished for good this time. Who knows, but this time there’s not a whole lot left for someone to buy out of receivership. When Steiner originally put a&b sound into CCAA in 2005, they had 22 stores. This time, new owner Seanix and Paul Girard have nada. Indeed, even the value of the name brand "a&b sound" is pretty much gone.

Sphere: Related Content

More Bloggotage On Circuit City's Bankruptcy

I've just been told by an inside source that at the same time that other video vendors like Sony and Toshiba and Sharp (who is only out $7 million, most of which is probably insured) were pulling back from Circuit City, Samsung was very aggressive in offering Circuit City sweet terms in an effort to hoover up market share from the other brands.

Now they’re on the hook for $115 million. Looks like that cunning plan didn’t pan out as well as they might have hoped.

And while I'm on the subject, what where the cowboys in Hewlett-Packard's national accounts office thinking? Looking at the creditor filing, what's startling is how far out in front HP is from everyone but Samsung, which makes me wonder if they had any risk management at all. There's no way that HP's $119 million in receivables is just 90 days current. Did they just think that they could stem the bleeding at CC by throwing product at them?

It makes me wonder how exposed HP is to other large retail partners, and how on top of the timely collecting of their receivables they are.

Sphere: Related Content

Tweeter Liquidated, Circuit City Fears Delisting From NYSE

A bad day for CE retail.

CE Pro: Circuit City Reports Non-Compliance With NYSE

Circuit City has been notified by the New York Stock Exchange (NYSE) that it didn't satisfy one of the standards for continued listing of the company's common stock.The NYSE told Circuit City it was "below criteria" because the average closing price of the company's common stock was less than $1 per share for 30 straight trading days as of October 22.

TWICE: Tweeter Reportedly Sold To Liquidator

Tweeter was purchased by a liquidator Thursday night after closing all of its distribution centers and pushing all inventory out to its stores, TWICE learned.
Company managers are currently being notified by conference call.
Last night, management held a conference call with top regional personnel to inform them of the decision, according to sources with close ties to the chain. The name of the liquidation company wasn’t mentioned in that call.

Normally you'd expect a snide comment at this point, but I've got nothing.

Sphere: Related Content

Over on GadgetTalk: Ranting about retail

MarketnewsGadgetTalk: Customer service redux

Sphere: Related Content

Circuit City just can't catch a break

News site InRich.com is reporting that Circuit City's credit reccomendation has just been yanked.

InRich.com: Circuit City loses credit agency approval

Bernard Sands, a credit reporting company that advises manufacturers whether to ship goods to retailers, has pulled it recommendation from Circuit City Stores Inc. after the company reported last week $239 million in losses for the second quarter.
The recommendation was pulled because of concerns that the retailer might not be able to pay vendors.
Losing the recommendation could affect the company's ability to get products that it sells.

Wow. When it rains, it pours. This isn't the sort of news CC's vendors want to hear before Christmas.

Marginally on topic, I was amused to look back at this news article from May that quoted Ultimate's Mark Wattles as saying a buyout was just around the corner, and that "that the buyer will likely be a private equity firm with deep-enough pockets to take the company private."

Deep pockets? Right now, with CC's market cap of $76.97 million, the Girl Guides of America could stage a hostile takeover with the proceeds of one of their cookie drives.

Sphere: Related Content

This Week In CE Pro: Taking Circuit City Behind The Woodshed, Redux

CE Pro: Is this Finally It For Circuit City?

It may seem unfair to always be picking on the struggling retailer. Well, CC continuing to flounder is news. It would also be news if they succeed. The choice is theirs, I guess.

Sphere: Related Content

Circuit City Circles Drain

Seriously, if the C-suite at beleagured CE retailer Circuit City have a cunning master plan, now would be a really good time to unveil it to the Street.

In the meantime, since CC's new slogan seems to be "how low can you go?" I dedicate this song in their honour.

Sphere: Related Content

Circuit City Plumbs New Depths

Given how beleaguered CE retailer Circuit City has found a new low for their share price, perhaps they subscribe to the axiom that the only thing worse than being talked about is not being talked about.






Or maybe their earnings call next week is going to be even worse than feared. It must be extra dreadful if it was a catalyst for Chairman, President and CEO Philip J Schoonover to have hung up his spurs last week: Past history indicated that he was virtually immune to scorn and criticism.



I can't wait to see what fresh hilarity CC serves up to us on September 29th.




**The content contained in this blog represents the opinions of Mr. Distad. This commentary may contain forward looking statements and definetely contains sarcasm and rude sentiments. This commentary in no way constitutes a solicitation of business or investment advice. If you're looking for stock picks from me, look somewhere else. Really, what were you thinking? If you came here because you were trolling Google looking for someone to help you get rich in only twenty minutes a month, you need to seriously re-evaluate your worldview. This blog is intended solely for the entertainment of the reader, and the author, and not neccessarily in that order.

Sphere: Related Content

Circuit City's Schoonover Out

This just in from the Department Of It's About Time: oft-excoriated Philip J. Schoonover has stepped down from his position as chairman, president and CEO of beleaguered CE retailer Circuit City.

TWICE: Circuit's Schoonover Resigns; Acting CEO Announced

Circuit City today announced that Philip J. Schoonover, chairman, president and CEO, has agreed to step down from those positions, effective immediately.Schoonover has also resigned as a director of the company, according to a release from the company.
Schoonover, 48, joined Circuit City in 2004 and had served as its president and a director since 2005. He has served as its chairman of the board and chief executive officer since 2006.
The board of directors had reportedly appointed James A. Marcum, 49, to serve as acting president and CEO. Marcum was elected as a director at the company's annual meeting of shareholders in June 2008. Since Aug. 18, 2008, he has served in the executive officer position of vice chairman and is playing a key role in leading the efforts to accelerate the company's turnaround, said Circuit City in the release.

CC still has a long row to hoe, but share prices jumped in after-hours trading, a sign of optimism on the Street.

Sphere: Related Content

Vizio seeks to rebadge as a "high-end" TV company

Vizio, the TV brand that other brands love to hate, is looking to make some changes.

CE Pro: Vizio Rebrands From Discount to ‘High End at Affordable Price’

According to ONE/x, Vizio's ad agency, Vizio will soon be marketing a surround-sound system with a wireless subwoofer for HDTVs. Vizio previewed the sound bar at CES earlier this year and says it will "compete with products from Sony, Samsung and others.""We want consumers to associatepremiere audio quality, along with images, when they think about Vizio," says Jason Wulfsohn, creative director at ONE/x Wulfsohn.

To date, Vizio has achieved market hegemony by catering to the "good enuff" market. Performance-wise their displays are hardly stellar, but they're cheap.

However, I'll be the first to admit that while I'm a huge video snob, I see things that regular consumers either can't see, or simply don't care enough to pay more for. For an awful lot of Sam's Club shoppers, good enough is "good enuff."

That said, regardless of "high-end" or "low-end" designations, if their TV's lacks discrete codes for programming them that means that it's a "retail" TV as opposed to a custom channel one.

However, Vizio seems to be happy with how they've positioned their products, so bully for them.

Sphere: Related Content

Circuit City tries to get it right

If you're of a cynical mindset, you might describe any efforts at process management by beleaguered CE retailer Circuit City as closing the barn door after the cows have got out.

However, I'm a little more optimistic. At this point, any intelligent decision that CC execs make is a good start. Such as this initiative to improve the process by which their credit card transactions are vetted.

Richmond.com: Circuit City Attacks Chargeback Penalties

For a company with one foot in the financial grave, Circuit City Stores Inc. is still showing a lot of life, staying focused on addressing nuts-and-bolts operational issues. In the latest news, announced by Vienna-based TARGUSinfo, we learn that the Richmond consumer electronics retailer is using TARGUSinfo's On-Demand Verification services in an effort to reduce chargeback penalties and payment fraud.
The on-demand services automatically evaluate data that customers supply in Web and call-center "card-not-present" purchases and instantly give Circuit City a contact quality rating for each proposed transaction. The rating is based upon whether a customer's name, address and phone number are accurate and all belong to the same person.
By automating approval of lower-risk transactions, Circuit City can intensify focus on higher-risk ones to reduce "chargebacks" or bank penalties for fraudulent purchases.

While not as noticeable up front to consumers as efforts to improve inventory management, or the quality of their sales force, the importance of cleaning up their transaction verification can have a very real impact on their bottom line. Ongoing problems with transaction verification can be thought of as the death-of-a-thousand-cuts.

After all, if there's trouble with reconciling credit card transactions, do you think the banks are just going to eat it if there are losses? Hardly.

So, as much as I like to have fun at Circuit City's expense, I'll give credit where it's due, so to speak.

Sphere: Related Content

Circuit City still talking big plans, but nobody's listening

Or at the very least, nobody's giving their plans much credence.

Boston.com: Circuit City still considering sale

RICHMOND, Va.—Circuit City Stores Inc. said Tuesday it's still considering a sale ofthe company four months after the consumer electronics retailer first announced it was reviewing its options to improve shareholder value.
The Richmond-based company remains committed to its turnaround plan but "the board continues to pursue strategic alternatives for the company that offer the best possible results for our shareholders in the long term," Chief Executive Philip J. Schoonover said in a statement announcing the appointment of James A. Marcum as the company's vice chairman.
Marcum, 49, is one of three directors nominated and elected to Circuit City's board in June to defuse a proxy battle with Mark J. Wattles, whose investment firm holds a 6.5 percent stake in the company. Marcum will continue to serve as a company director.

All of this sounds positively charming, except that nobody seems to be taking their turnaround plans seriously. Exhibit A: CC's stock has been getting flogged at under $2 for longer than any investors who got in between $6 and $10 in the past year like to think about.

At this point, long-term CC stakeholders really have to hope that things are darkest just before the dawn.

Sphere: Related Content

A&B Sound Closes Stores, Rumour Mill In High Gear

Marketnews reported the other day that storied West-coast CE retailer A&B Sound had closed two of their oldest and best-known locations: Vancouver's Seymour Street and Marine Drive.

MARKETNEWS EXCLUSIVE: a&b Sound Closes Two Vancouver Stores

a&b sound has closed two stores in Vancouver, Paul Girard informed me by telephone before noon Vancouver time today. The stores affected are the Seymour St. store downtown, and Marine Dr. location on the south side of the city.
Currently, five a&b sound locations remain: North Vancouver, Pitt Meadows, Abbotsford, Langford, and Edmonton, AB.
The North Vancouver and Langford stores are new, and had been seen as the new model with a smaller footprint.

In the intervening time since Wally Hucker broke the story, my phone and email have been deluged by Canadian industry contacts who either wanted more dirt, or wanted to tell me some.

Sadly, I must admit that I'm not as well plugged in to A&B Sound as I used to be. In the last three and a half years since Seanix bought them, virtually everyone I knew there has either quit or been fired. Consequently, I've got no really good insights into what's happening on the inside.

Regardless, the rumours about A&B's future are flying. I'm not going to repeat them here, in part because a) if you're plugged in to the Canadian CE scene, you've already heard them, b) if you're a reader in the U.S. you probably don't care and c) I'm already on Seanix/A&B owner Paul Girard's shitlist for some of my earlier (slander-free, I might add) bloggotage about A&B's direction, and further provocation would probably be unwise.

I will say, however, that I have to support Girard's decision to eliminate Seymour and Marine Drive. As old and storied as those locations were, they were still owned by former A&B owner Nick Steiner. It's a Well Known Fact that the rents in those location were steep indeed, which meant making a go of it was that much harder. In light of that, shuttering those locations makes good sense.

Sphere: Related Content

Is There Going To Be A Circuit City Deal, Or Not?

Interested observers will have noticed that Circuit City's share price has been slowly ebbing away from last Friday's spike when financier Carl Icahn announced interest in taking them private, with or without Blockbuster Video.

The (presently) 6% slide since last week may be a sign that large, well connected investors are doubting that after examining Circuit City's books, either Icahn or Blockbuster (or both) will advance an offer. It seems unlikely at this point, especially given Blockbuster's earlier ardor towards making a deal, but stranger things have happened.

**The content contained in this blog represents the opinions of Mr. Distad. This commentary may contain forward looking statements and definetely contains sarcasm and rude sentiments. This commentary in no way constitutes a solicitation of business or investment advice. If you're looking for stock picks from me, look somewhere else. Really, what were you thinking? If you came here because you were trolling Google looking for someone to help you get rich in only twenty minutes a month, you need to seriously re-evaluate your worldview. This blog is intended solely for the entertainment of the reader, and the author, and not neccessarily in that order.

Sphere: Related Content

The Brick and MonsterCable Taking Add-On Merchandising Too Far

Don't get me wrong, as a retail business analyst, I understand the importance of add-on selling and value-added merchandising to growing both top-line sales and bottom-line profits for CE retailers. But it is possible to take things too far.

Exhibit A: This week, national retailer The Brick is offering a FREE $89.97 Samsung DVD player when you buy a $149 Monster HDMI Cable. This is exactly why I read the weekly flyers as the come out, to stay on top of what the major players are up to.

this week's ROP from The Brick

There are lots of ancilliary reasons to run a promotion beyond the obvious one of getting people to buy stuff: focusing on overstock, special push ("spif") incentives from the vendor, or just plain tactical offerings designed to piss off competing retailers. Regardless, offering the hardware "free" if you buy an accessory that's half-again the retail price of the original device wanders dangerously close to the Theatre of the Absurd. For starters, it confirms in savy customer's minds that you're more interested in the value-add than the sale. How about a FREE TV when you buy the extended warranty?

Also, what about the fact that the point of add-on sales is to build your margin, above and beyond what your hardware sales deliver? CE hardware margins are tough, we all know that. That's why retailers have to accessorize. But by scratching off the hardware margins to zero, and replacing them with straight accessory margins isn't growth, it's just shuffling the deck. Ask category managers from HBC and Sears how their margins on electronics are during their periodic "save double the GST" offers, plus the extra 10% off for signing up for their credit card. Hint: they're not good.

As you can imagine, I'm not a big fan of taking the "buying business at the expense of margin" strategy too far.

Sphere: Related Content