June 13, 2007
We all knew that this week's Chapter 11 bankruptcy filing by consumer electronics chain Tweeter (Nasdaq: TWTR ) was coming. It wasn't April's announced layoffs and store closures. It wasn't even last month's dismal quarterly report that had the company concluding that it didn't have sufficient working capital to fund short-term needs (despite being on the receiving end of a hefty tax refund).
No, Tweeter's grim fate was sealed years ago when it wasn't able to open its stores under the Best Buy (NYSE: BBY ) or Wal-Mart (NYSE: WMT ) monikers.
It's as simple as that, really. No consumer electronics chain can compete against Wal-Mart on price, and Best Buy has cornered the market in niche superstores.
Even Circuit City (NYSE: CC ) , which seemed to be having a good run until recently, proved mortal; it joined rivals like CompUSA and Tweeter in shuttering underperforming stores.
Tweeter isn't going away. That is the luxury of Chapter 11 bankruptcy; you attempt to reorganize your operations at the expense of shareowners who will be shut out and creditors who will be lucky to get a fraction of what they are owed.
With looser shackles, maybe Tweeter will be able to give its latest makeover a better shot. The high-end CE Playground concept is a winner on paper. Remodeling its stores to appear as faux model homes -- showcasing home theater enhancements in different rooms -- is clever. It is also a promising alternative to actually switching its storefront signage to read Best Buy or Wal-Mart. After all, if it didn't have enough money to see it through its springtime inventory stocking needs, it won't be able to afford the lawyers necessary to battle copyright infringement lawsuits.
A history of Tweeter's recent missteps:
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Longtime Fool contributor Rick Munarriz knows Tweeter through the Sound Advice chain that it acquired during merrier times. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.