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To: Mike M who wrote (42907)	2/27/1999 1:05:00 PM
From: Glenn D. Rudolph	Read Replies (2) \| Respond to of 164684

INTERVIEW - CD Warehouse tunes in to e-commerce By Monica Summers NEW YORK, Feb 26 (Reuters) - CD Warehouse Inc. <CDWI.O>, which sells new and used compact discs, has started to click its way into the burgeoning realm of electronic commerce, but not before establishing itself as a good old-fashioned "bricks and mortar" company. Chief Executive Jerry Grizzle sees the Internet as the next logical step in his company's growth, but he said growing its more than 300 stores and franchises remained tantamount. The Oklahoma City retailer started in 1996 and went public in 1997. In an interview with Reuters, Grizzle said the fundamentals of his business strategy are superior to Internet-only stores like Amazon.com Inc. <AMZN.O> and CDNow Inc. <CDNW.O>, the two largest suppliers of recorded music online. He also rules out branching out beyond the music industry. "They are virtual companies that only exist on the Web," Grizzle said, noting that if the Web site suffered technical setbacks, sales would be hurt. Both Amazon.com and CDNow have yet to report a profit, despite rapid revenue growth. "That's not the case with CD Warehouse," Grizzle said. "Our stores will generate sales even if Internet is not working." Acquisitions, new store development and same-store sales growth are the three avenues that will boost profits in 1999 and beyond, he said. And in addition to promoting Internet sales starting in the second quarter, he is looking to fill in his strategy by adding related business operations. While some established retailers have moved slowly to embrace the Internet out of fear of cannibalizing existing businesses, CD Warehouse has managed an innovative hybrid of the two. It has transformed its chain of stores into buying depots for customers' used CDs, which it then turns around and sells on the online market, blending the virtues of local stores with the power of the global Internet market. When a customer buys a new or used CD on the Web site, the database sends an e-mail to the franchise or company store nearest to the buyer. A clerk at the store pulls the inventory off the floor and then ships it directly to the customer. Currently, Grizzle said all 70 company stores are hooked into the Web site, with each of the franchises coming online as they install software and enter inventory into the database. The company reported its eighth consecutive quarter of profit in the recent fourth quarter ended Dec. 31, 1998. Fueled by new store acquisitions in the past year, the company showed a fourth quarter profit of $307,914, nearly double the $163,444 reported in the same quarter of last year. Earnings per share were flat due to additional shares outstanding. Revenues of $5.3 million were just shy of twice the $2.8 million in revenues for the last quarter of 1997. Grizzle said plans to expand the company further internationally are also on the roster, eliminating the lag between overseas orders and deliveries from American stores. "One of the real catalysts behind considering an aggressive international expansion is to be able to fuel our Internet sales by shipping from a closer point of origin," he said. CD Warehouse now has one franchise store in France and four in England, but they are not plugged into its Web site yet. Grizzle said the company is in talks with two chain-store operations in England on the possibility of making acquisitions to improve its foothold in Europe. "As we get more and more of the base built underneath it to pull in all the power of our used inventory, then we'll start a real aggressive campaign of marketing on the web," Grizzle said, noting how currently, "You just kind of have to stumble on to it to know it's there." The goal is to have the inventory of every store, an average of about 15,000 items per store, in the system available by the end of the first quarter. CD Warehouse stock, which hit a high of $30 late last year amid exc...