Retail Track

THE UN-LEANING TOWER: The cutbacks and other initiatives implemented by management at Tower Records/Video/Books to return the company to fiscal prosperity have been working out well. At least, that's the word from Tower president Michael Solomon in an Aug. 24 e-mail sent to his employees and obtained by Billboard.

In talking about Tower's turnaround, Solomon writes, "Tower has reached 99% of our designated goals set for the 11 months ending this past June. This means that from a financial operating viewpoint, Tower is on solid footing."

Furthermore, Solomon says, "sales perch just above the industry trend" and that the chain strengthened its gross profit across the board throughout July, at a time when other retailers were experiencing significant dips. Indeed, he states, "Tower's present and well-fought-for financial solidity is in part due to store management, who have created significant staff and inventory management efficiencies."

But in the internal memo, he warns that the company might still reflect a net income loss at the end of its current fiscal period due to additional restructuring write-downs. "However," he states, "these results are completely in line with our expectations and will include current and future [earnings before interest, taxes, depreciation, and amortization] improvements."

Solomon recaps the changes at the company, noting that to get to where it is, management had to take "very serious action," which included the sale of Tower operations in Taiwan, Hong Kong, and Argentina, which converted to Tower Records franchises. Moreover, he reports that the company has hired Chilmark Partners and another unnamed investment bank in Japan to explore investor opportunities on behalf of Tower.

In moving from strategic moves to operations, Solomon reports that Tower has drastically scaled back its book business, resulting in reduced costs without sacrificing profits. Nonetheless, he adds that the chain is "still in the book and magazine business, and we will continue to develop it in a sensible and profitable manner."

Turning to store shutterings, he notes that the chain has closed its East Lansing, Mich., record store; an outlet store in Sacramento; and one of its two Toronto stores, with the other scheduled to go dark within 60 days. "Although we may not be in a substantial expansion mode, we do not presently intend to close any further record stores domestically," Solomon tells employees. In fact, he notes that the chain's Memphis store, which opened in July, has "proved to be a definite winner."

Moreover, he reports that while the chain's Boston store on Newbury Street has closed down, Tower has opened a temporary store in that city while it looks for a high-profile location. Another replacement store—scheduled to open in November in Sherman Oaks, Calif.—will be a flagship store, with 33,000 square feet of entertainment retail space. Two other new stores—in Birmingham, Mich., and Dessert Ridge, Ariz.—are set to bow in February 2002.

Finally, Solomon acknowledges that the chain has laid off some employees—a total of 111 throughout the stores and 70 at corporate headquarters in West Sacramento, Calif.



HEADING FOR THE PARK BENCH: Something I missed out on is that earlier this summer Jerry Adams, a longtime industry veteran who had been running Harmony House, left the chain to retire to the good life, according to Sandy Bean, VP at the Troy, Mich.-based merchant. Adams has been replaced by the owner, CEO Bill Thom, who had opted to let Adams run the chain day to day since he promoted Adams to president back in April 2000.

Thom's return to the helm of Harmony House apparently coincides with a failed attempt to sell the chain. Earlier this year, the company had hired a Midwest-based investment bank to shop Harmony House but apparently found little interest.

As a result, Thom is back for the long run, according to Bean, who reports that he has been revamping the company. Six stores have been closed in the past eight months, for a store count of 33, down from a peak of 39. Moreover, she says, the chain expects to close a few more in the next couple of months.

Other changes at the chain include cutting back on inventory, particularly at the warehouse. "We will buy more frequently and wisely," Bean says. Going forward, the chain's newest motto is "Harmony House . . . where music lives."

Now that Thom's back, is he revamping the chain so that he can clean it up and put it on the block again? Bean replies, "Everything's for sale at the right price."