Electronics boutique reorganizes, cuts kids, collectibles divisions - Brief Article

DSN Retailing Today, Feb 25, 2002 by Doug Desjardins

WEST CHESTER, PA. -- Video game retailer Electronics Boutique is getting back to basics this year with plans to open 200 new stores and eliminate its kids and sports divisions.

The 937-store company plans to close its 29 EB Kids stores and try to find a buyer for its 22-unit BC Sports Collectibles chain. Company president and ceo Jeffrey Griffiths said both initiatives should be completed by June.

"These actions will enable Electronics Boutique to focus on our core video game business," said Griffiths in a conference call with analysts Feb. 4. "In short, without the distractions of other store formats, we can focus on what we do best."

Just two years ago, Electronics Boutique was facing a very different growth prospect, attempting to add stores fast by acquiring 400-unit specialty retailer FuncoLand. Yet the effort was thwarted by Babbage's, which outbid EB thanks to backing by parent company Barnes & Noble Inc. Now it's back into an organic growth mode and will increase its footprint by more than 20% this year with the addition of 200 new stores.

The decision to eliminate its kids and sports stores follows a nine-week holiday season in which Electronics Boutique's same store sales increased 39.6% over the same period last year. Griffiths said same store sales would have been 1% higher if the performance of EB Kids and BC Sports were not factored in.

"Given growth projections for the video game industry of at least 20% annually over the next three years, we believe the most effective use of management's time and the company's capital is to focus on games," said Griffiths.

Electronics Boutique launched its EB Kids venture in 1999 and built it into a 29-store unit. While the chain plans to shutter 17 of the stores, it will convert 12 of them to standard Electronics Boutique outlets.

BC Sports Collectibles was founded in 1995 through a single-store acquisition. Griffiths said the chain intends to sell BC Sports during the first half of the year, but has not yet identified any potential buyers.

The company expects to record a $16 million charge against fourth quarter earnings because of the restructuring, but said the changes will improve annual earnings by more than $3 million when complete.