This holiday season may be a challenge for high-end consumer electronics retailers. It most certainly will be if the fiscal 2003 (ended September 30) earnings release from Tweeter
The company lost nearly $12 million for the year on declining same-store sales. For the current quarter, meanwhile, Tweeter says "there is a high degree of uncertainty in forecasting our revenue for the Holiday season," while projecting another same-store sales decline, even as revenue, powered by new stores, should come in ahead of year-ago levels.
Selling high-end consumer electronics is difficult in a downbeat economy. Companies like Tweeter and Ultimate Electronics
Meanwhile, Best Buy
Still, Tweeter, about flat since going public in 1999, is following a sound strategy. Working on internal structure and operations -- it owns a variety of chains the company believes can be further integrated -- seems prudent. As does the company's focus on inventory controls and slowing growth, while concentrating, within reason, on building its brand.
With limited cash resources, taking on additional debt to fund growth would only increase interest expense -- a bad idea with Tweeter no longer profitable on an operating basis. Yes, the road looks bumpy for Tweeter, but the company improves its chances of arriving safely by not taking on too much speed.