For Tandy, Its Universe Is Shrinking
Tandy Corp. on Monday became the latest computer retailer to bow to stiff competition and sluggish consumer demand when it announced it will close 19 Computer City stores, including seven in the Southland, and will sell its 17-store chain of Incredible Universe computer superstores.
“We’ve examined the profitability of the stores, and these locations weren’t meeting our expectations,” said Tandy spokesman Tony Magoulas.
Fort Worth-based Tandy operates 109 Computer City stores nationwide. Magoulas said Tandy will begin liquidation Wednesday at Computer City stores in Torrance, Riverside, Brea, Costa Mesa, Beverly Hills, Cerritos and Montclair. Each store employs about 35 people, Magoulas said, adding that the company would attempt to place most employees at Tandy-owned Radio Shacks or other Computer City stores.
Like other computer retailers, such as Best Buy and Circuit City, Computer City has been hurt by larger rival CompUSA, which focuses on the corporate market and training, and the slowing growth of personal computer sales.
The Incredible Universe electronics superstores have suffered from lackluster sales since the first stores opened in 1992. Analysts said the superstores, which averaged 184,000 square feet, suffered from their depth of selection and did not bring in enough customers to justify the higher costs of operating such huge stores.
“The stores had a lot of bells and whistles, lots of lights and catchy displays,” said Eric Boyce, vice president of First Dallas Securities. “People were curious, but there wasn’t enough compelling reason for them to switch buying patterns to Incredible Universe.”
Palo Alto-based Fry’s Electronics Inc. has agreed to buy six Incredible Universe locations, including one in Sacramento and one in San Diego. Tandy will continue to operate the stores until Fry’s takes possession. The fate of the more than 4,000 employees at the Incredible Universe stores was unclear.
Fry’s Electronics operates 10 computer and consumer electronics stores of up to 150,000 square feet in California. Fry’s, a private company founded in 1985, had no comment Monday.
The move by Fry’s caught some analysts by surprise.
“Why Fry’s ended up buying six of the Incredible Universe stores is a good question--most people in the industry view them as a white elephant. They must have gotten an incredible deal,” said New York-based Merrill Lynch Vice President Peter Caruso.
Boyce said that even though Tandy was careful in expanding its Incredible Universe stores, that didn’t translate into increased sales.
“I think for management, [selling Incredible Universe] was kind of an admission of error,” he said.
Analysts said Tandy’s Radio Shack was doing well compared with competitors Circuit City and Best Buy.
“Incredible Universe had become a substantial drag--not only on the company but on investor morale,” Caruso said.
Analysts had estimated that Incredible Universe lost $35 million in 1995. Tandy said it plans to take a $170-million charge in the fourth quarter to pay for the store closings and layoffs.
The other Computer City stores slated for closing are: three in Washington, D.C.; two in Baltimore; and one each in San Jose; Houston; Boston; Cherry Hill, N.J.; Charlotte, N.C.; Cincinnati and King of Prussia, a Philadelphia suburb. Two stores in Atlanta and Chicago will be relocated.
Tandy shares rose 75 cents to $46.25 on the New York Stock Exchange.
Times wire services contributed to this report.