Skip to main content

In its heyday, A&B Sound Ltd. was such an icon of the Western Canadian music industry that its founder Fred Steiner used to say of his rivals, "What competition?"

But 45 years after Mr. Steiner opened a store that grew into a chain of 21 outlets in British Columbia, Alberta, Saskatchewan and Manitoba, A&B Sound appears to have met its match. The private company filed for bankruptcy protection yesterday, saying it couldn't keep up with a new generation of competitors in the electronics and music retailing sector.

"This is death by attrition," said Tim Howley, chief executive officer of A&B, which was renowned for having among the cheapest CD and DVD prices in North America.

Western Canada's second-largest electronics retailer said it had filed for protection under the Companies Creditors Arrangement Act.

The filing is part of a plan to restructure under U.S. ownership. It was the latest victim of the so-called "category killers" such as Best Buy, Future Shop and Wal-Mart, which have used deep price discounting to dominate the electronics sector.

Sun Capital Partners Group Inc. has signed a deal to take over and invest in the company after buying out Mr. Steiner's son Nick, who was not involved in the day-to-day running of A&B.

Under the revitalization plan the company's 800 employees will keep their jobs under the same terms and conditions. It will also retain virtually all of its outlets in Western Canada.

The chain generated sales in 2004 of approximately $200-million.

The mood of the employees was upbeat despite yesterday's developments, Mr. Howley said. "They have known for some time that this was coming,'' he said.

With financial backing from Sun, A&B will continue to focus on the more discerning end of the market, targeting people seeking custom-made speakers and imported CDs and DVDs.

"I think they have a tough battle," said David Gray, president of retailing consultancy Sixth Line Solutions in Vancouver.

"There is no doubt in my mind that to succeed they need to find a consumer-relevant point of differentiation from the category killers. And this will take work and a far stronger understanding and connection to the consumers in their markets than I suspect they currently have."

Mr. Gray said A&B has the same problem of other smaller regional retailers of their size: they don't have the economies of scale to take on the "big guys."

They're also too big to move into a specialty niche.

He added that Wal-Mart has stolen away entertainment sales "from everyone," while music downloading continues to squeeze retailers.

"A&B sells manufacturer-branded product that is available absolutely everywhere," he said. "This makes it even harder to differentiate. They have not been able to truly develop a unique experience and capitalize on what is otherwise a great relationship with the Western -- and especially B.C. -- consumer."

Still, having worked diligently to locate a purchaser and negotiate the terms of a conventional sale, A&B said yesterday it concluded that finalizing a transaction under Companies Creditors Arrangement Act would produce the best outcome for the stakeholders.

It intends to present a plan of reorganization as quickly as possible to its creditors and to the court.

Follow Marina Strauss on Twitter: @MarinaStraussOpens in a new window

Report an error

Editorial code of conduct

Tickers mentioned in this story

Interact with The Globe