Slamming the door on its retail chain operation, Creative Computers said Monday that it has closed six of seven stores and laid off 150 employees in the face of an expected first-quarter loss.
The Torrance-based computer retailer said it expects to report its first loss in more than a year and a half.
Last quarter, Creative Computers reported earnings of about $1 million on sales of $178 million. On Monday, its shares tumbled $2.38 to close at $8.38 on Nasdaq, a 22% decline. The stock traded as high as $17 in October.
Creative Computers shut its Lawndale, El Toro, San Diego and three Chicago-area Elek-tek stores and laid off most of its retail workers Friday. The profitable Santa Monica store, which primarily serves corporate clients, remains open.
Following an industrywide trend, Creative Computers will shift its focus to its four mail-order catalogs and its new online bidding site, uBid.
"We're excited. We can focus on the areas where we see the greatest potential," said company President Frank Khulusi. "Retail was just a side business."
Company officials said retail operating costs, heavy investments in its Internet auction site and the razor-slim margins of computer reselling cut into the firm's profit.
"We're not surprised. At some point, we knew they'd need to exit the traditional storefront," said analyst Peter Schaeffer of SBC Warburg Dillon Read in New York. "Catalog retailing is what they do well."
Retail accounted for about 14% of the company's sales, or about $100 million, with the bulk of revenue drawn from catalogs--MacMall, PC Mall, DataCom Mall and ComputAbility--and direct marketing.
Schaeffer lowered his 1998 earnings forecast Monday to 71 cents from 84 cents per share--which still represents an increase from last year's profit of 58 cents, he noted.
The three Chicago stores that closed Friday were acquired last September in an attempt to bolster its retail arm.
"They didn't have the critical mass," said Chuck McDonald, research analyst for William Blair & Co. in Chicago. "PC retailing is a difficult business."
Once an Apple Computer stalwart, Creative Computers began selling personal computers with Microsoft operating systems and Intel hardware in 1995.
Personal computers now account for about half the firm's sales. Propelled by the growth of its PC sales, first-quarter revenue is projected to be more than $160 million. Despite Apple Computer's decline, Creative Computers will continue to offer its products.
In a similar move, Norwalk-Conn.-based Micro Warehouse Inc. slashed 600 jobs in February due to poor sales of Apple Computer products and company restructuring.