Platt Music Corp., one of Los Angeles' oldest companies, has closed its operations and liquidated its holdings--the victim of a costly expansion drive and increased competition from consumer electronics emporiums.
Although the 82-year-old company's initial business was selling sheet music and player piano rolls, it had gradually evolved into a profitable appliance and consumer electronic concessionaire in May Co. and other California department stores.
However, in 1983, Platt expanded operations into Marshall Field stores in Chicago and Bloomingdale's outlets in New York. The move siphoned revenues at a time when the company needed all of its resources to fight the stepped up competition from such volume discounters as Circuit City and Federated Group.
"It was a very costly move, and not that successful," said William Sliney, Platt's former chief financial officer. "It's failure was the beginning of the retrenchment."
Platt is the latest victim of the hard-hitting competition among consumer electronics dealers, a fight that has been fueled by an expanding supply of inexpensive products from the Far East and aggressive price slashing by retailers.
Other evidence of the shakeout: Pacific Stereo closed its doors last year after filing for bankruptcy; Federated Group was sold to Atari Corp. in August for a price many analysts considered a bargain, and Leo's Stereo has changed owners twice in the last 18 months.
For Platt, however, the end was particularly disappointing. The company, founded by the Platt family in 1905, started out selling music and then musical instruments. About 70 years ago, Platt started selling pianos as a concessionaire in May Co. stores in Southern California. The relationship grew to include household appliances, such as washers and refrigerators and consumer electronics, and endured until October, 1987.
Although Platt filed for liquidation just a month after its contract with May Co. was terminated, insiders say the move was not what prompted the company shut down. Platt was already behind in its payments to suppliers and had formed a creditors' committee to try to work things out when the May Co. contract ended.
When privately owned Platt turned over its holdings for liquidation by the Credit Managers Assn. of California last month, its liabilities totaled about $75 million and its assets were estimated at about $15 million, according to Richard Kaufman, association president.
Kaufman said proceeds from the appliance and electronics inventory auction and the sale of the company's headquarters in Torrance will be divided among creditors. Unsecured creditors, he said, might receive as little as 10% of what they are owed.
Platt officials said May Co. stores in Southern California and Emporium-Capwell stores in Northern California have taken over the chain's consumer electronic and appliances sales operations. The move, in effect, cuts out the middleman, and allows the department stores to deal directly with manufacturers and become eligible for dealer incentives.
Meanwhile, top Platt executives have formed a new company by spinning off a portion of the now-defunct firm's operations. The new firm, Phoenix Service Corp., will continue to sell extended service contracts with the merchandise sold at May Co. and Emporium-Capwell stores. Phoenix will also handle the service contracts Pratt sold at its concession outlets.
"It's the same people running a new company," Sliney said. "Consumer service plans is a better business than selling the products."
Michael Glazer, former chairman of Platt and now chairman of Phoenix, said creditors are not unhappy with the spinning off of the service contracts into a separate business because Phoenix has also taken with it the long-term obligation to handle the contracts.