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January 29, 1998
Egghead Closing All Retail Stores
By THE ASSOCIATED PRESS
POKANE, Wash. — Computer products retailer Egghead Inc. said Wednesday it will close all 80 of its retail stores, lay off most of its work force and change its name as it shifts focus to selling over the Internet.
The reorganization is one in a series of cutbacks for Egghead, once one of the industry's biggest retailers. Egghead will lay off all but about 200 of its 800 employees over the next few months, George P. Orban, chairman and chief executive officer of Egghead, said. Eighty retail stores will be closed over the next few months, along with a distribution center at Sacramento, Calif.
“We believe that Egghead’s strong brand name and growing base of over 1 million unique e-mail addresses will be significant assets as we focus on the Internet.”
George P. Orban,
Egghead chief executive officer
"We had to make the choice of where we wanted to focus the attention of management and where we could get the best return ... and we decided that was on the Internet," Orban said.The reorganization was announced simultaneously with the company's third-quarter earnings. Egghead reported a net loss of $6.6 million, or 29 cents per share, on sales of $99 million. That compares with net income of $1.5 million or 9 cents per share for the comparable period the previous year. Egghead said figures on a diluted basis, which would include stock options, were not immediately available. Shares of Egghead dropped 18 percent Wednesday, falling $1.37 1/2 to $6.37 1/2 in midday trading on the Nasdaq Stock Market.
Operations that will remain include Egghead's corporate headquarters in the Spokane suburb of Liberty Lake, and the Portland, Ore., office of Surplus Direct, a subsidiary Egghead acquired last year which sells close-out computer hardware via catalogs and the Internet at bargain prices.
Egghead will change its name to Egghead.com Inc. to reflect its emphasis on Internet commerce, Orban said.
"We believe that Egghead's strong brand name and growing base of over 1 million unique e-mail addresses will be significant assets as we focus on the Internet," he said.
The company's two Web sites are generating revenues of about $1 million a month, Orban said.
Although the moves are expected to save $13.4 million a year, Egghead said it expects to incur additional operating losses for at least two years as it builds an Internet customer base.
Egghead was founded in 1984 and used small retail outlets as its sales format. The company grew rapidly until about 1990, peaking at about 210 retail outlets. But the emerging "superstore" retailers began offering stiff competition by getting into the software sales business.
When Egghead moved its corporate operations from Issaquah, east of Seattle, to Spokane in the fall of 1995, it had 2,500 employees and operated retail stores in 30 states. After reporting disappointing earnings last year, Egghead closed 77 stores and cut the number of markets in which it operated from 54 to 24. The moves resulted in the layoffs of about 800 employees.
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