Tweeter Group Continues Expansion; Numbers up for Best Buy, Sony Electronics

Large companies may be chopping jobs by the thousands, but there are signs elsewhere that the economy is still booming. Recent figures from electronics retailers Best Buy and the Tweeter Home Entertainment Group and from Sony Electronics indicate only a partial slowdown in spending for quality audio/video gear.

Canton, MA–based Tweeter Group reported April 4 that its second-quarter revenue increased 36.8%, with same-store sales up 3.6%. The company has been expanding consistently for the past three years, acquiring successful upscale regional retailers in the mid-Atlantic states, the Southeast, Texas, and elsewhere. The typical Tweeter Group store is a 10,000 square-foot space specializing in quality home-entertainment products, as opposed to mass-market electronics whose primary appeal is low cost. "How we conduct our business is totally different than Circuit City or Best Buy," Tweeter CEO Jeffery Stone told reporters. "One of the reasons we've been so successful is because we are an alternative to those types of shopping environments."

On April 6, two days after releasing its quarterly report, Tweeter announced that it had reached an agreement to acquire Audio Video Systems, a three-store chain in Charlotte, NC. Operated by SMK Marketing, Inc., Audio Video Systems has been in the Charlotte market for 13 years, and enjoyed sales of about $15 million last year. A fourth store will open this summer, shortly after the completion of the acquisition by Tweeter, expected around June 1. For the purposes of the deal, Audio Video Systems was valued at $4.75 million, and will be acquired with a combination of cash and stock. AVS president David Stollmack will stay with the company, supervising Tweeter operations in the "tri-state" (NC, SC, and TN) area.

The acquisition "helps fill one of our remaining geographic 'holes' on the East Coast," Stone said. Tweeter plans to open new stores later this year in Nashville, TN and Greenville, SC, in addition to the Charlotte locations. "We envision over a dozen stores eventually in the North Carolina market and will begin our build-out after we complete the Nashville and Greenville openings, which should be by the summer of 2002. The Audio Video Systems name will change to Tweeter this summer, and the stores opening in Nashville and Greenville will open under the Tweeter name as well." The Tweeter Group should have 119 profitable stores by the end of fiscal 2001, a spokesman commented.

Despite Jeffrey Stone's disparaging remarks, Best Buy is also doing well, with a 16% rise in net profits reported for its fiscal fourth quarter. The Eden Prairie, MN–based electronics chain reported an increase in sales of 27% for the same period. On April 4, Best Buy reported net income of $189.7 million for the quarter ended March 31, compared with net income of $163.8 million for the same period in the previous year. In January 2001, Best Buy completed a $377 million acquisition of Musicland stores, a move that added the Sam Goody, Suncoast, Media Play, and On Cue chains to its roster. Best Buy also recently acquired Seattle's Magnolia Hi-Fi stores. Best Buy is predicting growth of 16% to 18% in 2002. The company opened 62 new stores last year and plans to open about 60 additional new stores in the coming year. The Best Buy network includes more than 1700 stores, and the company plans to have 40 stores in the New York and New Jersey area by 2004.

Good news for retailers also means good news for their suppliers. Bloomberg News reported April 3 that Sony Electronics enjoyed a 15% rise in US sales for the fiscal year that ended Saturday, March 31. Total sales amounted to about $14 billion, according to Sony Electronics president Fujio Nishida, who mentioned that DVD players constituted one of the strongest categories last year. Approximately 30% of Sony Corporation's consumer electronics sales take place in the US, Nishida said. His company expects sales growth in the 10–15% range in the next year. Sony is a major supplier to retailers like the Tweeter Group and Best Buy, Inc.