Ailing Federated Shuts 15 Stores, Will Trim 400 Jobs
Federated Group, a troubled consumer electronics chain, on Tuesday disclosed that it was closing 15 of its 60 stores, including one in Southern California, and slashing 400 jobs from its payroll. The company also said it had installed a new group of senior executives in a bid to turn around its business.
The moves came one month after Federated’s parent, Atari Corp., announced that it wanted to sell the retail chain, which lost $124 million in 1988.
Federated on Tuesday shut down eight stores in California, four in Arizona and three in Texas, where it also closed a regional headquarters and warehouse. Employees weren’t informed until they arrived at work and found the operations closed.
The California store closures, which accounted for about 180 to 200 of the layoffs, were in the San Gabriel Valley community of La Puente along with Fresno, Modesto, Stockton, Sacramento, San Jose, Pinole and Colma. Federated also closed stores in Ft. Worth, El Paso, San Antonio, Phoenix and Tuscon.
“This kind of drastic reduction is very aggressive. It is very unfortunate. It is a very difficult situation,” said James D. Fisher, Federated’s newly announced vice president of marketing. “We’ve just had this history of poor performance, therefore it takes some drastic action to correct it.”
Fisher added that the company plans to “refocus our resources on the larger key markets” where Federated has been more successful. Atari said it owns the real estate at four or five of the closed stores and may sell the sites.
Federated said it now will concentrate on the Southern California market, where it has 21 stores, along with Sacramento, Dallas and Houston. The company’s headquarters will continue to be in Sunnyvale, Calif., and a regional office and warehouse will remain in the City of Commerce, where the 19-year-old company was based until it was acquired by Atari in 1987 for $67.3 million.
Industry observers have long held that Federated, once a leader among the Southern California consumer electronics chains, had become less competitive because of its narrow product mix largely consisting of videocassette recorders, televisions and home and car stereo equipment.
Other discount retailers, chief among them Circuit City, have moved aggressively into the market with a broad mix of products, including home appliances.
Fisher said Federated would continue its competitive pricing strategy but that it is looking at some new product categories, including home office equipment, home appliances and gifts. The idea, he said, is to make more effective use of store space.
The future ownership of the chain remains unclear. Gregory A. Pratt, chief financial officer at Atari, said he understood “that there is an interest” among the newly named top executives in acquiring the chain. On that point, however, Fisher would say only that “our roup is very interested in leading Federated to become a leading factor in the consumer electronics field. We are taking aggressive action to return Federated to sound basic retailing techniques.”
Federated’s new management team will continue to be headed by Jack Tramiel, who is president of the chain and chairman and chief executive of Atari. The company’s new strategy, however, was devised by a new cadre of vice presidents, including Fisher, who has 13 years of consumer electronics experience in marketing and promotions. The group also includes Lew Brown, vice president of merchandising, who previously worked for Good Guys and Pacific Stereo and was a founding partner of Home Express, a chain of home accessory stores; Bill Turner, vice president of store operations, who was with Bullocks’/Bullocks Wilshire for 15 years; and Howard Cohn, vice president of finance, a 20-year veteran of the consumer electronics industry.
