Sun Television & Appliances Inc.

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Sun Television & Appliances Inc.

1583 Alum Creek Drive
Columbus, Ohio 43209-2713
(614) 445-8401
Fax: (614) 444-0849

Public Company
Incorporated: 1949
Employees: 1,070
Sales: $398.64 million
Stock Exchanges: NASDAQ
SICs: 5731 Radio, Television and Consumer Electronics Stores; 5722 Household Appliance Stores; 7699 Repair Services, Nec; 6719 Holding Companies, Nec

Sun Television & Appliances Inc., Ohios leading consumer electronics and appliance discounter, expanded its operations to include Pennsylvania, western New York, and West Virginia in the late 1980s and early 1990s, establishing nearly 40 stores in the region by the end of 1993. In a September 1992 article in Barrons magazine, the companys president, Robert Oyster, maintained that Sun held more than a 50 percent share of the Columbus, Ohio, market for consumer electronics and appliances and had captured between 20 and 25 percent of that market in its other metropolitan areas. Suns management credits its low price guarantee, broad selection, aggressive local newspaper advertising, and well-trained service staff for its dramatic growth during the late 1980s and early 1990s.

Sun Television was founded in 1949 by Macy T. Block and a partner as a subsidiary of ZS Sun Limited Partnership. In May 1991, Sun Television was taken public, with an initialoffering of two million common shares. Still, nearly 60 percent of the companys shares remained under the control of management, including Block, who was elected to the posts of chairperson and chief executive officer. This high proportion of inside ownership contributed to the companys tight-lipped policy on financial and historical information.

Presumably beginning operations as a retailer and repair service for televisions and other relatively simple electronic appliances such as radios and hi-fi systems, the company was offering a wide variety of merchandise through a chain of stores by the early 1980s. Sun distributed merchandise to its stores from a warehouse it maintained in Columbus, using its own fleet of trucks. Although most retailers of electronics began contracting with manufacturers for repair services during this time, Sun continued to offer customers its own repair service, which reportedly generated about six percent of annual revenues.

During this time, Sun established a catalog division complete with a toll-free number through which customers could purchase name-brand office equipment. Suns offerings expanded to include facsimile machines, word processors, copiers, typewriters, printers, projectors, transcribers, and other items popular for home and office use. Home computers were introduced to the Sun product line in 1990. Committed to maintaining a sales staff knowledgeable in the companys merchandise, Sun employees underwent extensive training seminars in an effort to provide customers with quality service. Suns lowest price in town guarantee proved popular among price-conscious consumers.

In April 1980, Sun Television filed a $500,000 lawsuit against a Lancaster, Ohio, firm that called itself Sun Furniture, claiming that the smaller companys name infringed on Sun Televisions trade name and confused consumers. The litigation was settled in May of the following year, when Sun Furniture agreed to remove the word sun from all advertising material and from its building, equipment, and motor vehicles by July 1. The district court judge in charge of the case also permanently enjoined Sun Furniture from using sun in connection with any other operation of the business.

Sun began to expand rapidly in the late 1980s and early 1990s, more than tripling in size from 1988 to 1994. Eschewing expansion through acquisitions, Sun continued to focus on establishing new stores in small communities rather than in urban areas, where competition was great. Elliot Schlang, an analyst with Kidder Peabody, noted in a 1993 Fortune article that this strategy proved advantageous for the growing company, commenting that although Suns concentration has been in smaller communities,... there are hundreds of them.

Sun also preferred to cluster new stores near existing outlets, which allowed for advertising and distribution efficiencies. Some analysts observed, however, that this policy tended to promote cannibalism among the stores, retarding sales growth at individual stores. Nevertheless, Oyster told Fortune that this regional focus helped the company avoid the boom-and-bust cycles of the coasts, allowing them to enjoy moderate but solid growth. When scouting sites, the company sought high-traffic areas, either at strip shopping centers or in freestanding locations at regional malls. Most of the new stores were superstores, with net selling space of 20,000 square feet. The firm crossed the Ohio state line in 1988, adding a superstore in Mars, Pennsylvania, near Pittsburgh.

Sun proceeded to exploit the territory between Pittsburgh and Columbus, building at least six stores near northeast Ohios metropolitan areas of Cleveland, Akron, and Youngstown beginning in 1990. This move soon brought Sun into an intense rivalry with Livonia, Michigan-based Fretter Inc. Fretter and Sun each made similar advertising claims, guaranteeing the lowest prices available, and in 1992, Fretter sued Sun, accusing that latter of airing false, malicious and defamatory television commercials. Sun promptly filed a countersuit to the same effect. By the end of the year, both Sun and Fretter had agreed to drop their suits.

Suns geographical expansion soon necessitated the construction of a satellite distribution center to cater to northeast Ohio.

The companys sales increased over 250 percent from 1989 to 1993, from $157.24 million to $398.64 million, while net income grew even faster over the same period, from $2.26 million to $11.6 million. In 1992, Sun was named one of Forbes magazines 200 best small companies, a ranking that took into account a companys five-year average annual returns on equity as well as sales and earnings growth. At that time, Sun had reported a 12.5 percent average annual return on equity from 1986 to 1991.

Sun successfully completed two common stock offerings during fiscal 1993. The net proceeds from these issues totaled $46.88 million, or over 1.5 million common shares. These funds, combined with increased cash flow from earnings, were used to pay off all the companys bank debt and position it to pursue future expansion opportunities. By the end of fiscal 1993, Sun had a bankroll of over $45 million with which to continue its growth strategy. That year, Sun established a superstore in Syracuse, New York, and planned to open a total of eight locations in its target region in May 1993. According to a March 1993 Fortune brief, Sun aimed to become the dominant consumer electronics and appliance retailer in northern Ohio and western Pennsylvania. The company established its first store in West Virginia in March 1994.

Further Reading:

Byrne, Harlan S., Sun Television & Appliances, Barrons, September 1, 1992, pp. 47-48.

Computer, Health Firms Top 200 List, The Columbus Dispatch, October 26, 1992, p. IE.

Phillips, Jeff, Sun TV Expanding into Home Computer Market, Business First Columbus, March 5, 1990, p. 4.

Sabath, Donald, Sun Appliance Chain Plans to Open Stores in Northeast Ohio, The Plain Dealer, October 6, 1990, p. 3F.

Selection, Low Prices at Sun TV, The Columbus Dispatch, January 29, 1989, p. 3G.

Solo, Sally, Sun Television & Appliances, Fortune, March 22, 1993, p. 91.

Sun Companies Settle Dispute on Trade Name, The Columbus Dispatch, May 7, 1981, p. 7D.

Thompson, Chris, Ad Battle Goes to Court, Crains Cleveland Business, February 17, 1992, p. 1.

Truck, Julie, Aggressive Sun Spars with New Competitor in Cleveland Market, Business First Columbus, March 2, 1992, p. 1.

April Dougal Gasbarre