Thursday, September 07, 2006
Tweeter Home Entertainment Group Announces Its Plans to Exit the Bang & Olufsen Business
On Friday, September 24, 2004, Tweeter Home Entertainment Group, Inc.'s Board of Directors voted unanimously to discontinue the operations of six of its "Bang & Olufsen" branded retail stores. The stores were acquired as part of the acquisition of Sound Advice Inc. in August 2001 and operate under a franchisee agreement.
The Company has transferred inventory and its rights with respect to two locations on September 28, 2004, and expects to transfer inventory and its rights with respect to two other locations in October 2004. In addition, the Company's leases at two locations have been terminated. The landlords at these locations have received financial consideration in exchange for their agreement to terminate the leases. One of these locations was closed on September 26, 2004 and the other location will be closed on December 31, 2004.
Joe McGuire, Senior Vice-President and Chief Financial Officer, said, "We estimate that the major exit costs and impairment charges related to the discontinued operations will be the write off of the remaining net book value of tangible assets, the impairment of open box/demo inventory and lease termination fees. The Company anticipates the total exit costs and impairment charges related to the discontinued operations to be approximately $2,400,000 to $2,600,000."
Jeffrey Stone, President and CEO, said, "As Tweeter worked through its turnaround strategy the last twenty-four months, it became apparent that having six uniquely different stores in our fleet just didn't make sense for us. Since we could not focus on them, they were a financial drain on the company. We have worked in partnership with our friends at Bang & Olufsen to transfer the majority of the leases to new entities who will have a greater ability than we did to drive this business."
Stone concluded, "We estimate that exiting this business will add $500,000 - $1,000,000 in operating profit to our income statement in FY05."
Bang & Olufsen America, Inc., a fully owned subsidiary of Bang & Olufsen A/S of Struer Denmark, currently operates 58 individual store locations (both corporately and independently owned) throughout North America and posted a 15% gain in retail sales for the fiscal year ended in May 2004. "In this niche, high-end market, we have learned we are more successful focusing on our core business and brand. We are now implementing a shift in our retail distribution strategy with the addition and transition to independently owned B&O branded stores," states Michael Aagaard Andersen, President of Bang & Olufsen America Inc. "We have enjoyed working with Tweeter over the past years and are proud to have done business with such a well respected business partner."
Tweeter Home Entertainment Group, Inc. (Nasdaq: TWTR) was founded in 1972 by current Chairman Sandy Bloomberg. Based in Canton, Massachusetts, the company is a national specialty consumer electronics retailer providing audio and video solutions for the home and car.
The company's fiscal 2003 revenues were $787 million. Tweeter has been named a "Consumer Electronics Retailer of the Year" by Audio-Video International every year since 1979 and was named one of the "100 Fastest Growing Companies" by Fortune in 2002. Tweeter Home Entertainment Group, Inc. now operates 177 stores under the Tweeter, HiFi Buys, Sound Advice, Bang & Olufsen, Electronic Interiors, Showcase Home Entertainment, Hillcrest High Fidelity and NOW! AudioVideo names in the New England, Texas, Southern California, Mid-Atlantic, Chicago, Southeast, Florida and Phoenix markets. The company employs more than 3,700 associates.
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