Monday, December 10, 2007

CompUSA Closure May Impact Other Electronics Vendors

Investors scrambled to understand the ramifications of CompUSA's announcement that it will close its final 100 stores by year end. According to the Wall Street Journal, Boston-based retail store liquidator Gordon Brothers Group will manage the closure of the stores and negotiate the sale of its real estate and other assets; two law firms have already been appointed to represent creditors. Syntax-Brillian (BRLC), whose Olevia flat panel monitors and TVs were carried by CompUSA, said in a press release Monday it has "no outstanding accounts receivables from this vendor as inventory shipped to CompUSA for the holiday selling season was paid for prior to shipping." It also said new retail partnerships with Target (TGT) would mitigate the loss of distribution via CompUSA. CompUSA is an authorized reseller of Apple (AAPL) products. Apple has not commented on any potential impact.

A fire-sale of CompUSA inventory could theoretically impact sales at other consumer electronics vendors and retailers -- including Best Buy (BBY), Circuit City (CC), Costco (COST), Dell (DELL), and Wal-Mart (WMT) -- during the critical holiday selling season. However, a source cited by Consumerist predicted that CompUSA inventory would go on sale starting Wednesday with initial discounts of only 10%. Consumerist also claimed that previous CompUSA liquidation sales "sucked." In the longer term, the closure of CompUSA may be a net positive for the other consumer electronics retailers to whom its customers will migrate, although the closure may also raise questions about the viability of second tier pure-play electronics retailers such as Circuit City. Mexican retail and telephone magnate Carlos Slim lost about $2 billion on his CompUSA investment.

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Jason Kiwaluk

Mower & Shoveller,

Ecommerce | Adtech | Innovation | Strategy

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