CompUSA Closing Doors After Christmas

You'd think with all the talk of hot electronics sales and a growing base of HDTV users that the larger chain stores would be flourishing and basking in the glory of increased sales and untold profits. Apparently, the CompUSA story is more akin to a large ship hemorrhaging cash and failing to compete in a sea of slashed profit margins and online sales.

This Spring, CompUSA received $40 million in investment income and closed over half its stores. Apparently this was the equivalent of twisting a tourniquet to stem the bleeding on a fatal wound. CompUSA based a large portion of its business on the sale of PCs and PC parts - a market that has seen its profits tank due to the prevalence of a few key online companies that have flooded the market with products at low-margin and reasonable shipping rates.

The remaining 103 stores are going to be either sold off to private companies or shut down completely following "Going out of business" sales over the Christmas season. If you are looking for a deal in your area this might be a good place to check out.

We often wonder, what causes such a large store to close? It's our belief that slashing margins was only one way for stores to compete. Combined with a strong economy and the successful positioning of consumer electronics as all but "disposable" and you got into a hairy situation that meant the lowest price won. This ultimately led to a very few volume leaders who decimated the market. It's a little scary and when the economy tightens up a bit, people may put a little more stake into a store that focuses on the long term effects of good customer support, warranty service and relationships.

CompUSA is being sold to Gordon Brothers Group LLC, a restructuring firm. Hopefully they will have some good ideas on how to take this failed giant and make an omelette out of the dropped eggs.

Source: AP via The Orlando Sentinel