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Electronics Boutique Narrows Focus To Video Games

4 Feb, 2002 By: Hive News

Electronics Boutique will sell off its sports collectibles stores, pull the plug on EB Kids operations and plans to open 200 new stores this year as it draws a bead exclusively on video games.

"These strategic measures reflect management's desire to focus its energy and resources exclusively on the significant growth opportunities in the video game industry, especially in light of the results we achieved in our core business in a challenging retail environment this past year," said president and CEO Jeffrey W. Griffiths. "Given growth projections for the video game industry of at least 20 percent annually for the next three years, we believe that the most effective use of management's time and the company's capital is to focus on this category."

The chain will discontinue all EB Kids operations, conducted in 29 stores, and sell its 22-store BC Sports Collectibles business.

The chain operates 937 stores under the Electronics Boutique and EB GameWorld shingles. It intends to convert 12 of its EB Kids stores to the Electronics Boutique format and add 200 new stores over the next year. The wave the of closures and conversions should be complete by June 30.

"In light of the significant capital investment and management resources required to successfully grow BC Sports Collectibles, it is in the best interests of our shareholders to focus on our core business," Griffiths said. "In short, we expect to realize numerous benefits and operating efficiencies throughout the organization by eliminating diverse store formats."

The company's worldwide comparable store sales performance for the nine-week holiday period ended January 5, would have been higher if the impact of the EB Kids and BC Sports Collectibles stores had been excluded. The company's worldwide comparable store sales climbed 39.6 percent, supported by a 43.1 percent increase in the United States, for the nine-week holiday period.

The company expects to record up to a $16 million pre-tax charge ($0.37 per diluted share) in its fiscal fourth quarter and year ended Feb. 2, consisting of the write down of fixed assets and inventory, and the estimated lease termination costs. The company anticipates an improvement in annualized pre-tax earnings in excess of $3 million after completion of these initiatives. It plans to offer "alternative job opportunities" to associates who may be displaced as a result of the changes, a spokesman said.

The company reaffirmed it expects to report earnings for its fourth fiscal quarter ending Feb. 2 at the high end of its previous guidance of $0.95 to $1 per diluted share, excluding the charge.

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