Systemax Board Likely to Fire Technology Products CEO Fiorentino

Fiorentino, who was put on administrative leave April 18 (CED April 19 p6), is scheduled to meet with Systemax’s board May 3 as required under his employment contract, Reinhold said. Reinhold declined to comment on the reasons for Fiorentino’s departure, but confirmed that additional employees, including Fiorentino’s brother, were dismissed. Fiorentino was put on administrative leave following an internal investigation stemming from a whistleblower complaint. Fiorentino hasn’t been available for comment.

"The impact that occurred is not material, all of the cash and inventory is there and there is no restatement” of Systemax’s balance sheets, Reinhold said. But there could be “some improvement” in Systemax’s profit and loss, he said.

Meanwhile, Systemax continues to weigh options for licensing the Circuit City brand. Systemax hired a top licensing company to help set a strategy for the Circuit City name, said Reinhold, who declined to identify the firm. Planning is in early stages, but Systemax is “exploring licensing alternatives” and considering an approach similar to what was done with the Sharper Image brand, Reinhold said. Sharper Image liquidated in 2008. An investment group consisting of liquidator Gordon Brothers, Hilco Consumer Capital, Windsong Brands and Bluestar Alliance bought the Sharper Image brand for $49 million in May 2009. Circuit City liquidated in 2009. Systemax bought the chain’s Internet assets, including the rights to the brand and CircuitCity.com for $14 million (CED May 15/09 p3). “We have all kinds of ways to monetize the Circuit City brand and the return on capital has been phenomenal,” Reinhold said.

Systemax’s TigerDirect.com is selling Circuit City-branded C91-41294 indoor/outdoor wireless speaker system ($59) that includes a transmitter with an iPod dock. The system is available in white and black colors and is packaged with a 13-ounce Circuit City Cup1000 plastic sports water bottle, which also available separately at $1.99.

In addition to hiring a licensing company, Systemax had shopped a Circuit City store-within-a-store concept to several retail chains, including Blockbuster, but didn’t land an agreement, Reinhold said. Systemax also has seen some interest in Circuit City franchise opportunities in international markets, but doesn’t have any agreements, he said.

Systemax is taking a “conservative” approach to store expansion and will grand open its 42nd CompUSA/TigerDirect location in Vernon Hills, Ill., this weekend, Reinhold said. There’s room for growth in existing markets including Chicago and Dallas-Fort Worth, where there are five and two locations, Reinhold said. New Mobile Connect departments that are designed to merchandise cellphones, tablets, netbooks and other mobile devices have been installed in fewer than five locations so far, Reinhold said. Systemax had planned to fully deploy the 2,000-square-foot Mobile Connect sections this year across its stores (CED Jan 11 p1).

Systemax has carrier agreements with AT&T and Sprint and is adding tablets to the section, including Motorola Xoom, Hewlett-Packard Slate and Samsung Galaxy, Systemax Business Analyst Tex Clark said. Systemax also is in the early stages of adding Dell to the product mix, Reinhold said. Systemax did a nine-month test with Dell products in Italy, he said. The retailer is continuing to pursue a distribution agreement with Apple, he said. “For whatever reason we are not an authorized reseller,” Reinhold said. “We're working on it."

Systemax also is putting four to five agents in each of several retail stores to drum up local business-to-business sales, Reinhold said. Systemax has 15 B2B call centers in the U.S. ranging in size from 94 seats in Naperville, Ill., to 20 in other locations, he said.

To prepare for growth, Systemax is bringing its 459,000-square-foot Jefferson, Ga., distribution center on line to serve its 18 stores in Florida as well as those on the eastern seaboard, Reinhold said. The center, which also includes a store, will be “neutral” to Systemax’s gross profit by year-end, he said. It will take some the pressure off the company’s 300,000-square-foot facility in Naperville, Ill., Reinhold said. The new distribution center has space for 35,000 SKUs, up from the 15,000 that could be housed at the Naperville operation, Reinhold said. And the Jefferson building has about 120 loading docks, an increase from the 30 available at the Chicago-area center, he said.

"We needed it because we were out of capacity,” Reinhold said. “It’s vastly closer to most of our stores than shipping from Chicago, so freight [cost] is significantly reduced and we have a lot of customers on the eastern seaboard. From a shipping point of view, it’s cheaper.”