Leo's Industries said Wednesday that its retail subsidiary, Leo's Stereo, has filed for bankruptcy, adding another name to the list of Southern California consumer electronics chains felled by the weak economy and stiff competition from large national chains.
Long Beach-based Leo's Industries failed to reach agreement with Cellcom Corp. after four months of talks aimed at alleviating Leo's "serious liquidity problems," Leo's said in a statement.
A "substantial creditor" of Leo's Stereos is foreclosing on inventory, and Leo's is negotiating with creditors of its cellular phone subsidiary, the company said.
The Chapter 11 filing follows the closing in recent years of local chains including Federated, Pacific Stereo and Golden Bear.
The company said it expects to show a $13-million loss for the year ended March 31, as well as a negative net worth of $2 million. The company also said it has been advised that it does not meet the listing requirements of the American Stock Exchange and had no assurance that its listing will be continued.
The news of the bankruptcy had not reached Leo's retail stores by early evening. "I haven't heard anything about it. We're open. We're doing business," said Hal Greenbaum, manager of a Leo's store in Hollywood.
Officials at Leo's headquarters were not available for comment.
Industry sources said Leo's Stereo, founded by Leo David, who is now president and chief operating officer, was both too small and too big for the present market.
"Leo got caught in the middle," said Al Brotsky, who runs a competing chain of stores, Al and Ed's Auto Sound. "His stores were not big enough to compete with the big operations and yet he couldn't be a specialist because of the size of his stores," which were designed to merchandise a broad range of home audio equipment as well as car electronics.
Leo's fortunes went on a roller-coaster ride in the late 1980s during a series of management changes, with sales dropping from $92 million in 1986 to $82.7 million in 1990. The parent company posted a loss of $2.4 million in 1989, but reported profits of $3.7 million in 1990.