Sound Advice, Inc. Business Information, Profile, and History
Dania Beach, Florida 33004
Sound Advice is a retailer of high-quality consumer electronics products with 24 Sound Advice stores in Florida, five Bang & Olufsen specialty stores, two Showcase Home Entertainment stores in Arizona, and an Electronics Interiors store in Palm Beach Gardens. By offering our customers the best products and the best service in an upscale, hands-on environment, Sound Advice has created a unique and enviable position in the market. The loyalty of our customers says it all.
History of Sound Advice, Inc.
Sound Advice, Inc., headquartered in Dania Beach, Florida, owns and operates a chain of stores that retail high-quality electronic products. Its holdings consist of 24 Sound Advice outlets in Florida;. five Bang & Olufsen specialty stores, also in Florida; two Showcase Home Entertainment centers in Scottsdale and Chandler, Arizona, plus a home-theater showroom in the Great Indoors store in Scottsdale; and an Electronics Interiors store in Palm Beach Gardens, Florida. Founded in 1974, Sound Advice has grown into Florida's largest specialty retailer of upscale, higher-end home entertainment and consumer electronic products, including home and car audio systems, large-screen televisions, home theater systems, video equipment, and personal electronic devices and accessories, excluding computers and computer-related items. In June 2001, the company agreed to be bought by Tweeter Home Entertainment Group Inc., leaving its fate as a continuing entity in its own name uncertain.
1974--85: From Questionable Start-Up to Solid Retailer
Sound Advice Inc. started up under something of a cloud, as Peter Beshouri, the company's CEO and chairman, has never had any qualms about admitting. In 1974, a group of three investors, including Thomas D. Powell, put up $100,000 in cash to fund the enterprise. As was later divulged, the problem was that most of the cash came out of a drug-traffic suitcase carried into the deal by Powell, who later admitted that it was raised from smuggling marijuana.
The partners convinced four former University of Michigan students who worked with Beshouri at a Tech Hi-Fi store in Detroit to get the enterprise up and running. Beshouri, just 18 and barely out of high school, already had electronic sales experience and had become manager of the Detroit store when he was just 17. He joined the others in Florida a few months after Sound Advice's founding in Fort Lauderdale, and two years later he opened and managed the company's first Tampa store. That was just the initial step in his mercurial rise in the company's chain of command, which, in 1982, saw him, at a youthful 27, become both Sound Advice's CEO and chairman. In 1985, he also became the company's president.
At the time they were hired, Beshouri and the others from Michigan had no knowledge of the source of the startup funds, though one of Powell's partners, Michael Blumberg, later confirmed that he had been suspicious. Powell even provided Sound Advice with another $95,000 in 1975, helping the fledgling company stay on its feet. The truth about the source of Powell's investment money finally came out in 1984, when the federal government indicted him on drug charges and income tax evasion. Because the only tainted money in Sound Advice was in Powell's stock, in 1985 the government sold that stock back to the company and exonerated it of any complicity in the illegalities of Powell. Meanwhile, Powell began a ten-year jail sentence at Florida's Eglin Air Force Base.
Before the disclosure of Powell's felonious activities, Sound Advice grew apace on both Florida coasts. The company's first focus was on high-quality stereo equipment, though it gradually extended its line to encompass a broad range of home entertainment equipment. Unlike the growing number of deep-discount, power-merchandising giants that set a new trend in the 1980s, Sound Advice courted a fairly narrow customer base made up of people who wanted only the best quality merchandise regardless of price. For a few years, the company's upscale appeal concerned Beshouri and his associates, but the venture's success eventually allayed fears of its being too elitist. As reported in a January 1988 article in General Merchandise Trends, Beshouri said, 'We used to worry that customers thought we were high falutin'. Then we found out we were and it's okay to be.'
1986--90: Going Public and Facing the Competition
In 1986, Sound Advice went public, raising further questions about the source of its seed money. Attorneys with Oppenheimer & Co., which was handling the company's initial stock offering, recommended full public disclosure of the circumstances, with a note explaining that questions had been raised regarding the source of the funds. Beshouri, without argument, agreed to the note's inclusion.
The disclosure had no real adverse effect on the company. In 1987, its sales grew by almost 44 percent, up to $36.8 million, an increase of $11.2 million over its 1986 revenue of $25.6 million. Because Sound Advice added two new stores, expanded four, and relocated another, in the same period the company increased its retail space by 68 percent.
At the beginning of 1988, the company's projections called for an expansion of two to three new stores each year, an ambitious pace. Continued enlargement of existing stores was also planned, largely because store enlargement had already contributed to impressive same-store sales growth.
Despite a recession that was cooling down the nation's economy in the late 1980s, Sound Advice fared well. By the end of 1988, it owned and operated 17 stores in Florida, with gross sales of $55 million, which earned it the 40th ranking on Forbes' list of the 200 best small companies in the United States. The company was also on its growth target, having opened the year with just 14 stores in operation.
Furthermore, still bucking the national trend towards deeper discounts on lower-end-of-the-line items, the company was achieving success with its upscale policy intact. In 1988, its smallest television sets were major brand, 25-inch models. Its least expensive stereo receivers sold at prices starting at about $150, considerably more than lower-quality stereo receivers were selling for in the big discount outlets.
By 1990, Sound Advice's sales had risen to $91.5 million, but there was a net income drop over the previous year. The growth pace had also slowed somewhat. Although the expansion of some of its existing stores increased the retail chain's total square footage, the company opened no new stores between 1988 and 1990. Sound Advice still operated just 17 stores but plans did call for the opening of two more stores plus the expansion of three others before the end of the calendar year. The company attributed the drop in net income to a non-recurring inventory shrinkage and expenses incurred in conjunction with future expansion.
While Sound Advice also began to experience some competitive pressures from Circuit City, which entered the South Florida market in 1990, the company initially tried to stick to its strategy guns rather than wage a price war with that retail giant. Tentatively, Sound Advice did start moving lower on the price spectrum and added four new suppliers in hopes of expanding its customer base by attracting more lower and mid-range price tag shoppers. The company also changed its displays, taking items out of their glass showcases, giving them hands-on accessibility for customers.
1991--95: Challenges on Several Fronts
In the summer of 1991, Sound Advice attempted to negotiate a merger with Image Entertainment, the parent company of Audio King, a Minnesota-based chain of electronic stores. The two companies had signed a letter of intent just prior to the early June Consumer Electronics Show, but the deal collapsed in July. Spokesman for Sound Advice, Roy Casey, the company's CFO, indicated that the company would refocus its expansion energies towards opening new stores in its home market of Florida, where, the company's managers believed, sales could be increased efficiently without a major rise in cost.
In April 1992, the company became embroiled in an investigation prompted by Robert Jarkow, a former employee who charged that Sound Advice had made intentional misstatements to its auditors in its financial reports for the year ending on June 30, 1991. As a result of a 1992 internal investigation resulting from the charge, six shareholders brought suit against the company, and while Sound Advice denied any deliberate wrongdoing, it admitted that it had unintentionally misrepresented its earnings on statements made between 1988 and 1991. It corrected the errors through a series of balance sheet adjustments totaling $3.5 million. Meanwhile, the stockholders' suit continued, resulting in a $2.8 million settlement in their favor in November 1993.
Embarrassed by the investigation and suit, the company was relieved to put the matter behind it. The affair had driven its per share stock price from an all time high of $15 in 1991 to a low of $2.75 in 1992 and led to an ongoing SEC investigation. Peter Beshouri hoped to bolster the company's reputation by impressing Wall Street with growth and strong earnings. According to a May 1994 article in Florida Trend, Beshouri wanted to grow the company by as much as 50 percent within the year, expanding the chain to 30 stores. Plans for 1995 called for opening seven to ten stores outside Florida, in Washington, D.C., northern Virginia, and southern Maryland. At the same time, plans for entering markets in Texas, Georgia, North Carolina, and Pennsylvania were also on the drawing board.
However, because Sound Advice had made some other decisions that turned out badly, the company's expansion plans had to be put on the back burner if not altogether shoved off the stove. For one thing, by 1992 the company had started trying to compete more aggressively with much larger, national chains like Circuit City, Best Buy, and BrandsMart USA by broadening its product line to include additional lower-cost television, VCR, and audio equipment brands and models. Also, in 1994, because the larger competitors sold personal computers and accessories, Sound Advice joined the ranks, adding these to its merchandise line. The result was that the company was almost beaten into extinction. It lost money in 1994 and 1995, and though it escaped the fate of some of the other small companies, including Incredible Universe, Standard Brands, Buy Wise, and Kaufman & Roberts--all of which went out of business--it was badly reeling.
1996--98: A Return to the Tried and True
In 1996, surrendering to marketplace realities, Sound Advice discontinued selling computers and basically returned to its original strategy of selling high-end home entertainment equipment requiring professional installation. Still, the company was slow to recover. In 1996, it again posted a net loss, $4.2 million, and its bottom-line woes continued through 1997 and 1998, though by that last year the loss was limited to $1 million. Although it had not expanded into the terra incognita beyond Florida, where it still operated just 25 stores, the enterprise had begun to show signs of financial health. By 1998, it was getting help from the new digital technology that had started to invade the market in the form of higher-end products that seemed tailor-made for Sound Advice and its typical customers--those who wanted quality regardless of price. Of particular appeal to Beshouri were the new, very pricey high-definition television (HDTV) sets and the necessary and equally expensive accouterments to go with them: digital processors, DVD players, surround-sound speakers, high quality cabling, and even a whole satellite system.
In 1998, Sound Advice opened two new full-size stores, one in Tallahassee and one in North Palm Beach. It also opened its first two mall-based Bang & Olufsen stores, which sold that Danish company's audio products and accessories and featured selected products set in discrete display areas.
1999--2001: Imminent Merger with Tweeter Home Entertainment
As the century closed, what James McNair in his 1998 article 'Florida-Based Sound Advice Takes the High Ground' described as the company's 'tortoise-paced' expansion began gaining some ground. Between June 1999 and October 2000, it opened three more Bang & Olufsen stores. Also in October 2000, Sound Advice completed the acquisition of Showcase Home Entertainment, a Scottsdale, Arizona-based retailer of high-end electronics and custom design services. That company's holdings included two upscale stores in Scottsdale and Chandler, Arizona. Showcase also operated the home entertainment centers of The Great Indoors home design centers in Dallas and in Scottsdale. Importantly, the acquisition was Sound Advice's first venture outside Florida.
Next, in November, Sound Advice announced the debut of Electronic Interiors, a center based on its new concept in the design, integration, and installation of audio, video, and home-theater technology. Located at Florida's Palm Beach Gardens Mall, the center employed the Bang & Olufsen nested-store configuration as well as other automated and customized showrooms. Features included a small movie theater suggestive of early cinemas, electronics for bedrooms and bathrooms, and customized rooms housing home-entertainment systems.
In February 2001, Sound Advice announced that it had been notified that Tweeter Home Entertainment Group might seek a merger of the two companies. Tweeter, a national, 95-store audio and video retail chain, informed Sound Advice that it had a Schedule 13D filing with the SEC stating that it and the family of Samuel Bloomberg, Tweeter's chairman, owned 336,000 shares, or about 8.5 percent, of Sound Advice's common stock and that it might seek to purchase more. Tweeter sought to begin talks with Sound Advice about a possible merger; however, in a press release February 27, 2000, Peter Beshouri indicated that, given the trading value of Sound Advice's stock, no proposals would be likely to appeal to the company's shareholders. The message seemed to be that Sound Advice was going to continue hoeing its own row. However, in June 2001, Sound Advice relented, and agreed to be sold to Tweeter Home Entertainment for stock with a value of about $150 million. It remained to be seen whether Sound Advice would be merged into Tweeter or become a wholly-owned subsidiary continuing to do business under its established name.
Principal Competitors: Best Buy Co., Inc.; Circuit City Stores, Inc.; Radio Shack Corporation; Service Merchandise Company, Inc.; Wal-Mart Stores, Inc.
- 1974: Company is founded in Fort Lauderdale, Florida.
- 1976: Peter Beshouri becomes manager of company's first store in Tampa.
- 1982: Beshouri becomes Sound Advice's chairman and CEO.
- 1984: Founding partner Thomas Powell is indicted for tax evasion and drug trafficking.
- 1986: Sound Advice goes public.
- 1992: Reported misrepresentations in the company's financial statements lead to shareholders' suit and SEC investigation.
- 1998: Sound Advice opens its first two Bang & Olufsen stores.
- 2000: Company acquires Showcase Home Entertainment.
- 2001: Sound Advice agrees to sale of company to Tweeter Home Entertainment Group Inc.
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