Systemax Reviews Brand Strategy, Opens New TigerDirect Stores

In the October opening, an 18,000-square-foot TigerDirect location will be tucked into a 459,000-square-foot warehouse Systemax is opening in October in Jefferson, Ga. Systemax also added a 34,000-square-foot TigerDirect store in Chicago earlier this year. It continues to operate six TigerDirect outlets in Canada, including a recent addition in London, Ontario, Reinhold said. The opening of new TigerDirect stores appears to signal a change for Systemax, which earlier converted five TigerDirect outlets (CED June 12/09 p1) to the CompUSA banner, including those in the Raleigh-Durham, N.C., and Chicago.

Systemax has co-branded CompUSA’s website with “CompUSA Powered by TigerDirect” (CED July 26 p9) and “ultimately will decide what is the best strategy,” Reinhold said. Going with a single store brand would “seem to be logical,” though at Systemax “right now we use the best of both worlds,” he said. When the company bought bankrupt CompUSA’s assets in 2008, “we thought having one brand was very important,” he said. It also bought Circuit City assets last year. TigerDirect’s Internet business surpasses that of CompUSA.com, and some customers seek TigerDirect bricks and mortar locations, Reinhold said. “We drive a lot of traffic to TigerDirect stores from our Web presence."

TigerDirect’s weekly traffic fell 14 percent in Q2 from Q1 to 1.8 million visitors, company executives said. Systemax didn’t provide traffic figures for CompUSA.com or Circuitcity.com, the latter having 700,000 weekly visitors in Q1 (CED May 14 p6). Circuitcity.com’s traffic was down from 900,000 in Q2 2009 (CED Aug 13/09 p9), when CompUSA.com was at 556,000. Systemax’s retail stores posted a 6 percent same-store sales decline in Q2, the company said.

Systemax has no plans for reviving the Circuit City name for bricks and mortar stores, though it may consider franchising it in international markets, Reinhold said. Systemax “frequently” gets “a number of” queries about using the Circuit City banner in international regions, he said.

In the U.S., Systemax continues to deploy its Retail 2.0 format that features about 300 Internet-connected products that allow for a deeper level of information. It also features “waterfall” displays for digital cameras, camcorders, cellphones and GPS devices. Only “a couple” CompUSA stores haven’t deployed Retail 2.0, largely because they be relocated, Reinhold said.

Systemax Q2 profit rose 47 percent to $9.4 million despite a 5.8 percent decline in global consumer product sales to $388 million. Same-store sales fell 6 percent amid flat revenue from notebook PCs, company executives said. Business channel sales rose to $417.4 million from $309 million. Total sales increased to $805.8 million from $721.5 million as Systemax benefitted from the acquisition last fall of IT products wholesaler WStore in Europe. Systemax’s technology products operating income declined to $15 million from $16.3 million despite an increase in revenue to $743 million from $671.7 million. Industrial product operating income improved to $6.1 million from $4 million as sales jumped to $62.2 million from $48.8 million.

Systemax Q2 U.S. sales slipped to $456.1 million from $457 million a year earlier while those in Europe increased $241.2 million from $173.6 million. Gross profit grew to $115.2 million from $107 million and inventory increased to $380.4 million from $365.7 million Dec. 31. Systemax ended WStore’s $3.1 million credit facility in July. It will take $3 million of charges in the second half for severance and other costs tied to a restructuring of WStore in France, the company said.