Could upscale electronics retailer Tweeter
Home Entertainment Group, Inc.
file for bankruptcy?
The question is a valid one considering some of the recent developments both at the retailer and in electronics retailing this holiday season. Perhaps the most important development was the unexpected resignation of Judy Quye, Tweeter's senior vice president of sales, operation and installation services, leading to CEO
Joe McGuire to add sales oversight to his list of responsibilities.
In the retailing industry, an important development is Best Buy Co.'s expansion of its upscale electronics unit Magnolia, which has set it on a collision course with Tweeter and other regional up-market retailers that could send them down the same path that befell Montgomery Ward and The Wiz. The other big development that could further threaten the solvency of regional retailers is Wal-Mart's recent attempts to increase sales of electronics.
In the past, smaller chains like Tweeter only competed with bigger rivals Best Buy and Circuit City Stores Inc. in middle-tier electronics because Tweeter's entry products were the same models as the bigger rival's mid-tier line up. The strategy kept Tweeter and its regional peers alive and well despite the growth of the big-box electronics retailers over the last decade.
Another issue facing Tweeter, which also does business as HiFi Buys, Showcase and Sound Advice, is its refusal to carry computers and appliances. Even today, Tweeter still doesn't carry these items, but it has added video games to its offerings. Today's busy shopper may not necessarily want to buy Windex where they buy their electronics — a behavior that could explain Wal-Mart's problems in the electronics market — but they do want to buy a Dyson vacuum where they buy their TVs. This dilemma is especially putting the squeeze on Tweeter, which recently saw its price target cut to $3 a share from $5 by RBC Capital Markets, according to Blogging Stocks.
Like a cat, Tweeter seems to have nine lives as it has avoided bankruptcy and hostile bids in the past. One way it avoided bankruptcy when Best Buy first arrived in its Boston home market in the late 1990s was selling a stake to buyout firms. Tweeter took the capital and acquired retailers up and down the East Coast.
Even if Tweeter files for bankruptcy, it could again find itself in the hands of a buyout shop, which could buy it at a bankruptcy auction cheap. With its old debts wiped away, and new management and capital, perhaps Tweeter could enter a new round of acquisitions in an attempt to build national scale to better compete with Best Buy and Circuit City. Otherwise, Tweeter will be a fond memory like Montgomery Ward and The Wiz. —Matthew Wurtzel
See item from Blogging Stocks
See earnings story from Reuters
See related story from The Deal
See related story about Best Buy from Corporate Dealmaker
See profile of The Wiz bankruptcy from Bankruptcy Insider (subscription required)
See profile of Montgomery Ward bankruptcy from Bankruptcy Insider (subscription required)
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