Business as Usual for Tower Liquidators17 Oct, 2006 By: Erik Gruenwedel
Sales of movies and music at bankrupt Tower Records & Video stores have doubled since top bidder Great American Group initiated liquidation of all Tower inventory Oct. 7.
Great American and Norton LLC bid $134.3 million, topping by $500,000 a bid from previous favorite Trans World Entertainment, which had vowed to keep Tower a going concern.
With the majority of shoppers drawn by steep price reductions, some have reportedly felt slighted by the cold business-like dismantling of the venerable Tower brand.
Like a funeral home following a death in the family, Great American Group president Andy Gumaer said his company has attempted to balance a well-known deceased business' public farewell while trying to recoup more than the millions it paid for Tower's assets.
“It's tough. Some people get angry with the liquidator, and the truth is that we weren't the ones managing that company,” said Gumaer. “We were invited to bid and the creditors knew we were bidding solely for the purpose of liquidation. Had all those customers been in there before our sale, [Tower] wouldn't be in the position they're in.”
While Gumaer considered the Tower deal significant, he said Great American has been involved with larger liquidations, including closing 58 Mervyn's stores last year with more than $200 million in inventory.
With partners, Great American helped liquidate $1.8 billion in inventory for bankrupt Montgomery Ward, and has sold more than $2 billion in inventory for Kmart over the years.
“There's no question that, in the last 10 years, any high-profile bankruptcy … we have been involved with,” Gumaer said.
Tower's inventory is being sold via existing retail channels (89 stores) through a progression of discounts over a short period time (six weeks) in order to minimize overhead expenses.
During the liquidation, Great American pays the rent, employee salaries, insurance, utilities and related advertising costs.
“We will continue to use the majority of employees at store level until the inventory is sold in that particular location,” said Gumaer.
He said holding the bankruptcy sale closer to Christmas would probably have yielded a higher return since consumers tend to be in a shopping mood flush with holiday cash.
“We've kept the same infrastructure in place, including staffers, during the sale because when you are doing double the sales volume in a store you need all hands on deck,” he said.
Great American will auction off what's left of the inventory, in addition to store fixtures, lighting and signage when the sale process winds down.
“We paid a significant price for this transaction,” said Gumaer. “It was a lot. It certainly made the creditors happy to a certain degree. But, at the end of the day there is no guarantee this is going to be a profitable venture.”