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PCs squeezing stores' margins.

NEW YORK -- The personal computer may be one of the greatest innovations in the late 20th century for consumers, but for retailers turning a profit on PC hardware has been one of the greatest challenges.

The bottom has fallen out on PC retailing this fall, or so it would seem. Analyst David Childe, who tracks the PC business for Salomon Brothers, minced no words when he called October the "worst in the history of PC retailing."

He noted that retailers such as Best Buy, CompUSA and the Tandy group displayed negative comp store sales of 25 percent to 30 percent in the PC category. On Wednesday, The Good Guys! reported its first fiscal year operating loss in its 23 years, owing some of the downturn to the PC business.

Calling fiscal '96 a "truly difficult year," Good Guys! president and chief executive Robert Gunst said, "We faced a slowdown in consumer demand for audio and video products, along with a continuing shift in our product mix towards personal computers that lowered our gross margin."

The Good Guys! fiscal year ended Sept. 30, 1996, and did not take into account what has been for many a miserable October. Also last week, Wal-Mart said it would stop selling computers at 629 stores, 25 percent of the chain, because of their poor sales.

Dow Stereo/Video in San Diego quietly exited the traditional PC hardware business this year, and said it would only carry convergence PCs, like those forthcoming units from Compaq that incorporate more consumer electronics features like audio and video.

Not every consumer electronics retailer has told a tale of woe about PCs. Steve Hassall, merchandise manager at American Appliance, a 30-store chain based in Pennsauken, N.J., said, "Even though October was a difficult month we've continued to grow the computer business. In the last 60 days we've been authorized by Hewlett-Packard and Compaq to carry their systems. We have continued to maintain margin despite the aggressive promotions."

Salomon Brothers' Childe cited several reasons for October's bleak PC numbers, including the theory that many consumers are waiting until January when PCs equipped with Intel's MMX chip are expected to arrive in stores.
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Title Annotation:personal computers
Author:Ryan, Ken
Publication:HFN The Weekly Newspaper for the Home Furnishing Network
Article Type:Brief Article
Date:Nov 25, 1996
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