Ultimate Electronics' Great Leap Forward

Growing pains aren't always unpleasant. In the case of Denver-based Ultimate Electronics, they might be completely enjoyable.

On November 7, the up-scale 57-store retail chain announced an astounding 34% increase in sales for the quarter ended October 31, compared to the same period in 2001. Dollar totals were $177.8 million for the quarter, compared to $132.8 million for the same period last year. Year-to-date sales grew 26% to $462 million from $365.5 million for the first nine months last year.

The huge surge was largely due to the opening of 10 new stores in the past 90 days, 9 in the Dallas/Ft. Worth area and one in St. Louis, MO. (Comparable store sales rose 1% during the first 9 months.) Ultimate plans to have 12 new stores open by the end of 2002, with 8–10 new openings slated for 2003, according to president and chief operating officer Dave Workman. The company will relocate and expand its store in Rochester, MN, and has signed leases for one in the Minneapolis/St. Paul metro area and two in the Austin, TX region, Workman stated.

Ultimate is now one of the biggest upscale electronics chains, and competes head-to-head against Tweeter Group operations in some areas, particularly in Texas. Ultimate's total revenue last year was approximately $581 million.

The company's evolution from a high-end boutique to a more inclusive full-scale electronics retailer led to a recent decision by Ultimate company directors to pull out of the Progressive Retailers Organization (PRO Group), a specialty electronics retailers' association that Ultimate helped found 17 years ago. The group's buying power allows its members to have similar leverage with manufacturers to that enjoyed by larger enterprises. Ultimate's departure from PRO, effective December 31, will leave the group with only 13 members and a combined projected sales volume for the coming year of $1.4 billion.

Ultimate executives apparently felt there might be a conflict of interest in continuing membership, given that its new stores would compete against fellow members. In addition, its expansion into product categories not served by other PRO Group retailers suggests that the cooperative's merchandising policies might no longer work to Ultimate's benefit. The typical PRO Group store is a 10,000 square-foot establishment with niche products, compared to Ultimate's 33,000 square-foot "megastores" with a much wider range of offerings.

Ultimate Electronics was the last remaining founding member of the PRO Group. "The loss of its participation in group activities will be felt," said PRO Group executive director Roger Heuberger. "Ultimate has been a huge part of the PRO culture and an integral part of its growth. We wish our many friends at Ultimate all the best as they venture out on their own."

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