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Best Buy plans to shrink Sam Goody mall chain

By James Covert

Dow Jones Newswires

NEW YORK -- Best Buy Co.'s mall-based Sam Goody stores have been performing worse than expected in recent months, and the company intends to shrink store sizes and close some locations altogether, company executives said Friday.

Stores have suffered from "a rapid drop-off in sales of prerecorded music," President and Chief Executive Brad Anderson told analysts and investors at a conference hosted by Goldman Sachs &; Co.

In addition, Sam Goody stores are suffering from a general slowdown in customer traffic at shopping malls.

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Best Buy said it would record a charge of $348 million to lower the value of acquisitions, resulting in a revised loss for its fiscal first quarter.

The nation's No. 1 consumer electronics retailer said the charge reflects a "practical and realistic" appraisal of its Musicland unit, a 1,300-store music and video chain, and Magnolia Hi-Fi, a high-end electronics chain with 16 stores on the West Coast. Sam Goody is part of the Musicland unit.

The long-term outlook for prerecorded music sales is dim.

On the bright side, most of the mall-based Sam Goody stores carry leases that average about three years each.

After Best Buy acquired the Sam Goody stores last year as part of its Musicland purchase, Best Buy experimented with new product offerings, including DVDs, video games and consumer electronics. While the first two merchandise categories have been successful, the latter category hasn't, Anderson said.

Although Sam Goody stores have suffered, Sam Goody's rural locations have been more successful, and the company will continue to expand that chain.

Best Buy is based in Eden Prairie, Minn.

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