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Best Buy Will Open 7 Stores in Southland : Retailing: Consumer electronics giant plans to be in business in time for Christmas. One analyst predicts a competitive ‘slugfest.’

TIMES STAFF WRITER

In a move sure to roil an already hotly competitive market, Best Buy Co., the nation’s second-largest specialty retailer of consumer electronics, announced plans Monday for an assault on Southern California with seven stores opening in November--just in time for Christmas.

The Minneapolis-based company also plans to hire as many as 1,400 new workers to staff the discount mega-stores that will go head-to-head with Circuit City, the Good Guys, Adray’s and other electronics retailers for an estimated $5 billion in sales.

The company said it plans to open five more stores by next spring and, by the end of next year, will have a total of 20 stores in the region. That could mean 4,000 new jobs, though that total could be offset by job losses if other stores are driven out of business by the new competition.

“It’s going to be a slugfest,” said Kurt Barnard, an industry analyst and president of Barnard’s Retail Marketing Report in Berkeley Heights, N.J. The retail environment “has not been the greatest (in Southern California), and the competition in home electronics is ferocious, to put it charitably. But Best Buy is a formidable competitor,” he added.

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Wall Street reacted with uncertainty to the news: Best Buy was off 25 cents to close Monday at $36 on the New York Stock Exchange. Circuit City shares fell 25 cents to $24.125. The Good Guys gained 25 cents to $13.

Best Buy’s decision to spend in the “high tens of millions of dollars” to gain a foothold in Southern California was seen as a vote of confidence in the region’s nascent economic recovery.

“Such investment decisions indicate some optimism about the prospects in the future,” said Lynn Reaser, chief economist at First Interstate Bancorp.

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Best Buy officials said they intend to profit, whatever the economic climate here. “If you get the retail environment right, the customers will come to you,” Ken Weller, Best Buy’s senior vice president for sales, said at a news conference in Torrance. “And we like to think maybe (the recession) has bottomed out.”

The company calls itself the nation’s fastest-growing publicly held consumer electronics specialty retailer. It reported $3 billion in sales for fiscal 1994, which ended in February, nearly double the $1.62 billion for 1993.

The company plans initially to open stores in Mission Viejo, West Covina, City of Industry, Torrance, Hawthorne, Palmdale and Rancho Cucamonga. Each store will employ between 140 and 220 people, with workers earning between $6.30 and $13.80 an hour.

To screen candidates, the company is holding three-week job fairs at various sites around Southern California. On Monday, more than 150 people showed up in the first 45 minutes of a job fair at the Torrance Holiday Inn.

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The stores will be as much as 58,000 square feet in size, larger than the typical electronics retailer. Company officials wouldn’t say how much they were spending, but analysts speculated that the area’s depressed commercial real estate market made it easier for the retailer to procure large sites.

The company already operates 165 stores in 22 states, mostly in the Midwest, selling televisions and stereos, personal computers, home office equipment, records and videos.

The 29-year-old company will have its work cut out for it here, and it’s unclear whether the Southland market is big enough for everyone, analysts said.

“Circuit City has dominated the market in Southern California for a long period of time,” said Lewis H. Alton, managing partner of the L.H. Alton & Co. investment firm in San Francisco. “The Good Guys, which is headquartered in the Bay Area, has done a good job of encroaching on that marketplace. But no other chain, other than Adray’s, has done a particularly good job, and many have failed and left over the years: Federated, Silo.”

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But if anyone can crack the market, Best Buy can, he said. “They have the best track record over the last couple of years of any major consumer electronics discounter in the industry” in terms of sales and earnings growth, he said.

The Southern California expansion is part of a national program of growth. Best Buy says it will open 50 new stores in the current fiscal year.

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Times staff writer Tom Petruno contributed to this report.


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