SAN FRANCISCO — Pacific Stereo Corp., a victim of fierce competition in the consumer electronics retailing industry, closed its stores Monday and filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code.
In a brief statement, the closely held, Emeryville, Calif.-based retailer blamed the filing on "actions by a very few creditors" and said its 84 stores in California, Illinois, Washington and Texas would be closed "temporarily."
In its petition filed in U.S. Bankruptcy Court in Oakland, the company said its debts totaled $36.8 million, outstripping its assets of $21.6 million. The petition listed 5,098 creditors.
Employees at two stores said they expected that at least some of the stores will reopen for liquidation sales next week. A spokeswoman at the firm's headquarters declined to confirm the reports but said a plan would be announced next week.
Industry observers said the company, one of the oldest and best-known stereo retailers in the West, rode the audio boom of the '70s but faltered when confronted with such changes in the industry as the growing importance of video products and the emergence of electronics "superstores" such as Federated Group and Circuit City.
Last year, for example, the company dropped the word Stereo from the name of its stores in an attempt to convey a broader image to consumers. Despite the name change, many of its stores lacked adequate display space for television sets and videocassette recorders, competitors said.
"They kind of lost touch with what was going on in their marketplace," said Jeffrey Sellman, president of San Francisco Stereo Inc., a small retailer specializing in high-end audio and video products.
Added Guy Ford, a securities analyst with Investment Corp. of Virginia: "A shakeout is definitely in the works. The larger, better-capitalized firms are going to increasingly dominate the mass-market end of the business."
Although Pacific doesn't disclose sales or earnings, Consumer Electronics, a monthly publication, estimated that the chain had sales last year of $215 million, making it the 19th-largest consumer electronics retailer in the nation.
Even some of the biggest chains have shown weakness in recent months as a result of sluggish sales and too many new stores, analysts say. Federated Group, based in City of Commerce, said recently that net income in its fourth fiscal quarter ended March 2 fell 57% on lower-than-expected sales.
In recent months, Pacific has found nearly all of its territory invaded by superstores such as Federated. In addition, consumer spending in Texas has been unusually weak as a result of depressed conditions in the oil and gas industry.
The company's bankruptcy petition listed such creditors as Sony Corp. of America, owed $5.3 million; Superscope Products, $3 million; Hitachi Sales Corp. of America, $1.5 million, and Pioneer Electronics, $1.2 million.
In addition, the chain's previous owner, CBS Inc., held $4.2 million in promissory notes and preferred stock. CBS bought Pacific Stereo in 1968 but sold it to Burke Mathes, a former partner in the Curtis Mathes retail electronics chain, in January, 1983. At the time, CBS said Pacific had been losing money since 1979.
About 1960: Founded as Pacific Radio Supply in Berkeley.
1968: By then known as Pacific Stereo, the company is purchased by CBS Inc. and thrives during the audio component boom of the 1970s.
1983: Sold by CBS to Burke Mathes after turning unprofitable in 1979 as audio boom wanes and competition intensifies.
1985: Drops the word Stereo from its store name to reflect a broader product line.
May, 1986: Files for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. Says its 84 stores in California, Illinois, Washington and Texas would be closed temporarily.