Good Guys Become ‘Home’ Boys With Renovation Strategy

In an effort to bolster continually sagging sales and create a more inviting environment for customers, Good Guys Inc. on Wednesday unveiled plans to renovate all 76 of its consumer electronics retail stores.

The Brisbane, Calif.-based company reopened its Beverly Center store Tuesday after a three-month closure--during which it sacrificed $1 million in profit--to better equip its flagship Los Angeles store to sell advanced digital audio and video products, President and Chief Executive Robert Gunst said.

The new store features areas designed to resemble rooms in a home, complete with cream-colored walls, wood floors and warm pink and emerald lighting.

“Our balance sheet is strong enough that we can do this even when times are tight,” Gunst said.

Good Guys has lost money for four of the last five quarters, and analysts expect the company to lose money into 1998. Good Guys shares, which fell to a seven-year low of $5 on July 25, have gained about 50% during the last month. The stock was unchanged Wednesday at $7.50 on Nasdaq.

In the nine months ended June 30, sales at Good Guys were off 4% to $686.5 million from $713.7 million a year ago. It lost $5.5 million, or 40 cents a share, compared with earnings of $3.6 million, or 26 cents a share, a year earlier.

These losses come principally from heightened competition at the hands of discounter Best Buy Co. and national chain Circuit City Stores Inc. The consumer electronics industry has not had any hot new products for years and must rely on sales of upgrade products to boost earnings, said Dennis Bryan, research analyst at First Pacific Advisors, which owned 1.9 million shares, or 13.4%, of Good Guys as of June 30.

“Most people have a TV and a VCR, and they’re satisfied,” Bryan said. “They need a reason to go back into your store.”

Floor space in the Good Guys Beverly Center store has been divided into four distinct areas, each filled with integrated systems so customers can test products and learn, for example, how televisions and stereo systems combine into a home theater.

The familiar walls of televisions and mazes of computer equipment, videocassette recorders and stereo systems have been pushed to the sides of the store.

As part of its redesign efforts, the company is also retraining its sales staff to better serve customers, said Brad Bramy, vice president of advertising for Good Guys.

“The sales associates are cross-trained, and one person can help a customer with a home entertainment center or to buy a new computer or to access the Internet,” he said.

The company also added a couch-lined customer-service center to get customers more involved and comfortable in their purchasing decisions so they will be less likely to return a product, Bramy said.

Bryan said Good Guys is betting that its customer-friendly concept will help increase upgrade sales as well as sales of new technologies like direct satellite dishes.

Gunst said the cost of remodeling “varies tremendously but certainly is over $2 million” per store. But the payoff can be huge. In the company’s prototype store in Redondo Beach, Good Guys has seen sales rise between 35% and 40% compared with comparable stores.

The design comes from Richard Altuna, who helped prominent retailers like Williams-Sonoma Inc., Nature Company and Pottery Barn appeal to upscale shoppers with their in-store decorations.

“Good Guys is going to succeed only if it differentiates itself from the market,” said Lewis Alton, general partner at San Francisco investment firm L.H. Alton & Co.

Alton said Best Buy has made inroads in Western U.S. markets, where Good Guys has all its stores, using price discounting to appeal to a lower-scale shopper. Circuit City, because of its size and volume of business, can also compete on the basis of price.