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By Mark Harrington
Dallas
NeoStar Retail Group is using its Chapter 11 bankruptcy protection status to close certain overlapping or underperforming stores, the company confirmed yesterday. At the same time, the company declined to comment on a rash of reports that it has been shopping around the chain and could reach an agreement with an unspecified buyer as early as next week.
Regardless of such an agreement, some 42 stores have been or soon will be closed throughout the country as part of an effort to reduce duplication as the company heads into its highest-volume sales season.
A spokesman said closure of the 42 stores would leave NeoStar with some 665 Babbage's and Software Etc. stores. NeoStar filed a petition with the bankruptcy court Oct. 25 to reject the 42 leases, the spokesman said.
All of the stores are located in malls containing both a Babbage's and Software Etc. store. In such cases, the spokesman said, the least profitable unit is to be shut down. He said NeoStar has already begun closing some of the sites. The 42 closures are expected to be followed by a review of all 665 remaining stores after the holiday season, said the spokesman. "The company has all its options open to it," he said, declining to speculate on how many stores the company would close at that time. "We will assess, at that time, the viability of each individual store."
Vendor sources who supply NeoStar said after the ailing retailer received its debtor-in-possession financing several weeks ago, orders from NeoStar have been flowing in, and sell-through appears to be relatively robust. The spokesman acknowledged NeoStar has gotten ample vendor support "and with that we've been able to restock." He said sales were "looking pretty good." He said the company had a strong launch of Nintendo 64 systems in stores, and he added Sony's PlayStation continues to sell well.
One NeoStar assistant store manager welcomed the flow of product back to stores, but said the chain must price more aggressively to be competitive with its superstore rivals. Whether or not an acquisition of NeoStar was in the works has been the subject of much speculation in recent weeks. Sources close to NeoStar said company executives have been actively shopping the chain to outside investors, including competitive and non-competitive companies. One source said an announcement of a possible agreement could come as soon as next week, following a nationwide managers meeting in town yesterday. The spokesman said NeoStar will not comment on such topics.
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