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Best Buy to Purchase L.A. Appliance Chain

The electronics retailing giant says it will pay $410million for Pacific Sales Kitchen and Bath Centers' 14 stores.

December 23, 2005|David Colker | Times Staff Writer

Electronics retailing giant Best Buy Co. said Thursday that it was acquiring Southland appliance chain Pacific Sales Kitchen and Bath Centers Inc. for $410 million.

Privately held Pacific Sales, with 14 stores in Southern California and $320 million in annual sales, caters to home-remodeling customers and sells pricey Viking and Jenn-Air brand stoves and Sub-Zero refrigerators.

Minneapolis-based Best Buy sells appliances in addition to electronics products, but its growth has come primarily by focusing on products with relatively low profit margins, analysts said.

"Pacific Sales gives them brands they never had access to," said Colin McGranahan, an analyst at Sanford C. Bernstein & Co. "They are clearly trying to move out of the commoditized business and go more toward the high end."

Best Buy plans to keep open all of the Pacific Sales stores and eventually will add more, possibly outside Southern California, said Darren Jackson, Best Buy's chief financial officer.

"We see an opportunity to grow," Jackson said. "We think they can teach us a few things about the affluent customer."

Pacific Sales probably will stick with its current business plan, under which its stores are open only Tuesday through Saturday and close at 6 p.m. "You don't fix what isn't broke," Jackson said.

The Los Angeles-based chain was started in 1960 by Jerry Turpanjian. The founder, now 71, wants to retire, Jackson said. The company was put up for sale several months ago.

Turpanjian declined to comment Thursday.

Best Buy is the nation's largest electronics retailer, with more than 930 stores and $27 billion in annual sales. It grew by offering a variety of CDs, DVDs and appliances.

In 2000, Best Buy bought Magnolia Hi-Fi, a high-end electronics retailer in Seattle. Best Buy has set up Magnolia centers inside some of its stores.

Jackson said it was too early to say whether Best Buy would duplicate that strategy with Pacific Sales.

Best Buy warned this month that "unacceptably high" expenses would hurt its earnings in its current quarter.

In the fiscal third quarter ended Nov. 26, its profit rose 10% to $138 million as sales climbed 10% to $7.3 billion.

The Pacific Sales deal is expected to close next month.

Best Buy shares fell 20 cents Thursday to $43.25.

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