REGIONAL RETAILERS HAVE LARGER AMBITIONS
While many retailers have slowed expansion as they wait out sluggish U.S. economy, regional retailers Ultimate Electronics and H.H. Gregg are pushing ahead on wave of interest in digital products. Ultimate filed last week to sell 2.7 million shares in effort to raise more than $70 million, while Gregg said it planned to open 11 stores in Atlanta area in 2003.
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Gregg, which is based in Indianapolis and operates 42 stores, has leases for Atlanta locations in various stages of negotiations but remains confident it will be open 11 outlets throughout 2003, COO Dennis May said. Chain will maintain existing 30,000-sq.-ft. format and will open warehouse, although size of that facility hasn’t been set, he said. Ultimate plans to use proceeds of stock sale to repay revolving credit debt and open new stores. It said in SEC filing that there was room in U.S. market for more than 250 stores based on its 30,000-50,000- sq.-ft. format, although CFO Alan Kessock conceded that was best case scenario. “Those chains that remain focused both in management and product mix will be able to expand,” NPD analyst Thomas Edwards said.
Expansion by 2 chains also may signal opening of capital markets to select speciality retailers, industry officials said. Publicly traded Ultimate, which has 46 stores, raised $30.7 million 1999 in $16.50-per-share offering. This time, share price is $29.20. Privately held Gregg is funding expansion internally and has no immediate plans to file for IPO, said May, who headed publicly traded Sun TV and Appliances before its closure and eventual sale of some stores to Gregg. “I think with high-definition television and other digital products, it has made the Wall Street community take a look at them [regional retailers],” Apex Sales Vp Gary Bennett said. For its part, Gregg has benefited from strong sales of digital products, May said. Kessock declined comment on status of capital markets for regional retailers, citing SEC-mandated quiet period surrounding stock offerings.
Other issue raised by Gregg’s expansion plans was whether it would continue membership in NATM Buying Group, of which Gregg CEO Jerry Throgmartin is pres. May and NATM Exec. Dir. William Trawick denied Gregg was planning to leave group and downplayed rumors of possible departure. Indeed, NATM has had member in Atlanta market in past. Roberds operated stores there as well as in Fla. and Ohio before closing in late 1990s. Only other NATM member with sights on Atlanta is Brandsmart, but its plans are 2 years off, Pres. Michael Perlman has said. Besides Brandsmart, next-closest NATM member would be Conn’s, which operates in Tex. “That’s a huge geographic and population area [between Ga. and Tex.] and you could do a whole lot of expansion before you come into competition with another NATM member,” Bennett said.