AT&T; to Close Its 338 Phone Stores and Lay Off 2,500

AT&T; Corp. will close its 338 stores that sell phones and answering machines, eliminating 2,500 store jobs, to concentrate on manufacturing those products.

“We believe larger retailers can distribute our products more efficiently than we can,” said Homa Firouztash, vice president of marketing, sales and product management at AT&T; Consumer Products.

Sears, Wal-Mart, Service Merchandise and other retailers account for about two-thirds of AT&T;’s annual telephone product sales at more than 17,000 outlets across the U.S. The consumer unit also distributes its products through catalogs.

However, the company said it will continue to operate its 170 retail stores that sell wireless products.

The phone center stores will close beginning next month. The move is AT&T;’s latest to slash billions of dollars in costs as it prepares to split into three companies by year-end. It plans to spin off its manufacturing and equipment arm, which includes AT&T; Consumer Products, operator of the phone centers. Another AT&T; company will provide telecommunications services and a third will focus on computers.

Closing the stores will “improve profitability and strengthen [Consumer Products] competitively for the future,” AT&T; said in a statement.

The costs to cover the store closings and job cuts were included in AT&T;’s previously announced restructuring charges, the nation’s largest long-distance telephone company said.

On Jan. 2, AT&T; said it would take a $4-billion fourth-quarter charge to cut 40,000 jobs, or 13% of its work force. AT&T; will report its fourth-quarter results today.

AT&T; shares closed up 37.5 cents at $65.25 on the New York Stock Exchange.

About 2,500 employees, including 2,050 union workers and 420 managers, will be fired as a result of the store closings, the company said. The cuts are part of 48,500 job cuts AT&T; plans over the next three years under its breakup plan.

The store closings will begin in February and will be completed as soon as possible, AT&T; said. The company declined to disclose sales figures for the stores.

AT&T; Consumer Products will begin making phones and other products for other companies, such as the regional Bell companies. It said it has made its first sale of phones to a local phone company, which it didn’t name.

The decision to be a manufacturer rather than a retailer also reflects the sluggish state of the retail industry. Analysts have said that too many stores are offering similar merchandise to consumers, who have cut back on spending amid concern about job security and as personal debt has reached $1 trillion.

“It’s about time” AT&T; closed down its phone centers, said Kurt Barnard, a longtime retail consultant and president of Barnard’s Retail Marketing Report. “AT&T; Phone Centers have no real justification for being.”