The Ultimate Boondoggle?What Happened to Ultimate Electronics?
April 2005
What happened to one of the industry's foremost retailers, and where is it headed?
By Joe Paone
Ultimate Electronics, the Rocky Mountain retail mainstay, has seen better days.
Its finances are in tatters, so much so that in January, it filed for bankruptcy protection. Its stock, once a hot commodity, is virtually worthless. It owes several of the industry's foremost vendors millions of dollars. Its boardroom and executive suites have undergone an extreme makeover, with the familiar faces of Founder Bill Pearse, President/CEO Dave Workman and numerous other executives exiting the company in the wake of a friendly bailout-cum-takeover by Mark Wattles, the dynamic founder of the Hollywood Video rental chain, and his own team.
It's now in the process of closing more than half of its stores and laying off about 900 employees.
"We hope Ultimate has a future ahead of it," says Dave Tognotti, general counsel of Monster Cable, Ultimate's largest creditor with a $10.86 million claim, according to bankruptcy documents. "We know Mark Wattles and his team are proven winners, proven turnaround specialists, and so I say we hope. Do we know? We'll have to wait and see."
What happened to this Thornton, Colo.-based regional powerhouse, ranked 26th among Dealerscope's Top 50 CE Retailers in 2003 and 2004?
Make no mistake, Ultimate didn't get complacent as the market for digital electronics exploded, starting in the late 90s. Quite the contrary—it rapidly expanded into the Midwest and the Southwest. But with inexpensive but adequate Chinese products enticing bargain-obsessed consumers, and big-box chains selling them in virtually every market, regional retailers are finding it ever more difficult to survive as mass merchandisers. Ultimate's misreading of the upheaval in CE retailing has proven near-fatal.
Unlike many local and regional independents and chains, who recognized the threat of retail behemoths like Best Buy and Wal-Mart and found salvation by going small, upscale, high-service and custom, Ultimate wanted it both ways. It expanded both the size and the market reach of its retail locations and its product selection, all while still trying to position itself as a high-end, high-service alternative to the big boxes. But the margins just weren't there to support such a business model, analysts say. In the process, Ultimate might have lost its soul as it was losing its shirt.
Ultimately, too big for its britches
Like most familiar names in CE retail, Ultimate's beginnings were humble. In 1968, husband and wife Bill and Barb Pearse opened their first small store, called Team Electronics, in the Denver suburb of Arvada. For the next 25 years, they judiciously opened other locations, now known as SoundTrack, throughout Colorado, but the business remained modest, and employed a personal, hands-on sales approach.
By Joe Paone
Ultimate Electronics, the Rocky Mountain retail mainstay, has seen better days.
Its finances are in tatters, so much so that in January, it filed for bankruptcy protection. Its stock, once a hot commodity, is virtually worthless. It owes several of the industry's foremost vendors millions of dollars. Its boardroom and executive suites have undergone an extreme makeover, with the familiar faces of Founder Bill Pearse, President/CEO Dave Workman and numerous other executives exiting the company in the wake of a friendly bailout-cum-takeover by Mark Wattles, the dynamic founder of the Hollywood Video rental chain, and his own team.
It's now in the process of closing more than half of its stores and laying off about 900 employees.
"We hope Ultimate has a future ahead of it," says Dave Tognotti, general counsel of Monster Cable, Ultimate's largest creditor with a $10.86 million claim, according to bankruptcy documents. "We know Mark Wattles and his team are proven winners, proven turnaround specialists, and so I say we hope. Do we know? We'll have to wait and see."
What happened to this Thornton, Colo.-based regional powerhouse, ranked 26th among Dealerscope's Top 50 CE Retailers in 2003 and 2004?
Make no mistake, Ultimate didn't get complacent as the market for digital electronics exploded, starting in the late 90s. Quite the contrary—it rapidly expanded into the Midwest and the Southwest. But with inexpensive but adequate Chinese products enticing bargain-obsessed consumers, and big-box chains selling them in virtually every market, regional retailers are finding it ever more difficult to survive as mass merchandisers. Ultimate's misreading of the upheaval in CE retailing has proven near-fatal.
Unlike many local and regional independents and chains, who recognized the threat of retail behemoths like Best Buy and Wal-Mart and found salvation by going small, upscale, high-service and custom, Ultimate wanted it both ways. It expanded both the size and the market reach of its retail locations and its product selection, all while still trying to position itself as a high-end, high-service alternative to the big boxes. But the margins just weren't there to support such a business model, analysts say. In the process, Ultimate might have lost its soul as it was losing its shirt.
Ultimately, too big for its britches
Like most familiar names in CE retail, Ultimate's beginnings were humble. In 1968, husband and wife Bill and Barb Pearse opened their first small store, called Team Electronics, in the Denver suburb of Arvada. For the next 25 years, they judiciously opened other locations, now known as SoundTrack, throughout Colorado, but the business remained modest, and employed a personal, hands-on sales approach.
