Tweeter may seek Ch. 11 protection

Canton consumer electronics chain Tweeter Home Entertainment Group Inc. said yesterday it may file for Chapter 11 bankruptcy protection, sending its beat-up stock down nearly 70 percent.

The warning came as the company reported a loss of $35 million in the quarter ended March 31, as revenue fell 13 percent to $163 million on slumping sales and shrinking profit margins of high-end televisions.

Yesterday, the company said it had no timeline for deciding whether to declare bankruptcy and said it did not plan to close more stores or cut additional jobs. In March the chain said it would shutter nearly one-third of its 153 stores and cut about 20 percent of its workforce as part of a major restructuring.

"As a public company, you have a responsibility when you're thinking about major things like" bankruptcy, Tweeter chief executive Joe McGuire said . "Here's the reality -- we're in the midst of a turnaround in the organization now and the question is: Do we need the court?"

The company said it did not have capital to fund its short-term needs and may declare bankruptcy if it cannot obtain additional capital or reach settlements with the landlords of stores that are to be closed. Tweeter is currently negotiating with landlords in two-thirds of the 49 stores targeted for closure and is examining the possibility of selling its 18.75 percent interest in audio house Tivoli Audio LLC, McGuire said.

Yesterday's news sent the stock price down to 41 cents from $1.35.

Bill Armstrong , analyst at CL King and Associates, said yesterday's disclosure was not a surprise given the steep decline in profit margins for flat panel TVs, increasing competition among consumer electronics retailers, and Tweeter's recent history. It has been losing money since 2001.

Mass market retailers such as Wal-Mart Stores Inc. have been expanding their consumer electronics offerings, and the Internet offers consumers low prices as well as information, creating a "squeeze play," said Steve Koenig , senior manager of industry analysis at the Consumer Electronics Association in Arlington, Va.

Last year, RadioShack Corp. said it would close 400 to 700 stores. Cambridge SoundWorks of North Andover recently decided to focus on catalog and Internet sales and closed all but one of its stores as it refocuses its business model, according to spokeswoman Maria Cataldo. Circuit City Stores Inc. said in February it would close about 70 stores in the United States and Canada.

McGuire said Tweeter would see growth in its CE Playground stores, which are more like high-end electronics boutiques. There are seven such stores open today, and two more on the way, he said. But bigger retailers are also focusing on high-end, service-oriented products.

Best Buy Co. offers Magnolia Home Theater products at "stores within stores." Circuit City and Comcast Corp. recently partnered to open Connect, a stand-alone consumer electronics boutique where customers can come to buy service, installation, and products.

Consumers are also doing more on their own, as they compare prices, read expert reviews, and buy products online.

"A lot of the footwork is being done on the Web; no longer do consumers go to a store and start to ask questions about a product," said Peter King , director of connected home devices at research firm Strategy Analytics.

Armstrong said private equity firms may buy Tweeter but not a rival chain.

"We are not actively shopping the company," said McGuire.

Carolyn Y. Johnson can be reached at cjohnson@globe.com.