Ritz Camera aims to remake itself by diversifying its inventory

By V. Dion Haynes
Washington Post Staff Writer
Monday, December 28, 2009; A11

David Ritz showed off his new toys -- flat-panel TVs, compact laptops and smartphones -- at his camera shop in Rockville.

Like General Motors and Chrysler, Ritz's company, Ritz Camera, emerged from bankruptcy protection this year with a plan to revamp its operation. Now known as Ritz Camera & Image, the reborn retailer has expanded its scope from just selling cameras, camera equipment and photos in a bid to appeal to a tech-savvy generation.

"We're not a camera store anymore -- we're an image store," said Ritz, who serves as the chain's chief executive. "We sell all products that allow you to either take, share, create or view your images."

Whether the new product lines catch on and succeed in turning around the retailer is an open question. As a privately held company, Ritz does not disclose its sales figures. Ritz said sales in the photo-imaging part of the business -- including cameras, calendars, DVDs and memory books -- "have increased significantly." But the company, he said, is still building the new product lines.

Mark Millman, president and chief executive of Millman Search Group, an Owings Mills, Md.-based retail consulting and executive search firm, applauded the new strategy.

"It's probably the right approach to take," Millman said, adding that the retailer is in a better position now to succeed because it shed its least profitable stores. "The camera [business] isn't what it used to be."

But given that consumers have dramatically pulled back on such discretionary purchases as televisions, computers and phones, other analysts said this may not be the ideal time to expand into those areas.

"I think it's great they've emerged from bankruptcy, but their model is troublesome," said Kenneth Brown, president of Washington-based Research Connect, which conducts financial analysis of retailers and other companies.

Brown said it will be difficult for Ritz to make money selling TVs, phones and laptops. Ritz, he said, is entering a very cluttered market space in the electronics sector with particularly strong competition from powerhouses Best Buy and Wal-Mart.

"If I were Ritz, I wouldn't focus on selling what everyone else is selling, but focus on breakthrough technology no one else has -- some highly specialized laptop you can't get at Best Buy," he said.

Founded by Ritz's uncle Benjamin Ritz, the company began in 1918 as a single portrait studio on the Atlantic City boardwalk. In 1936, Benjamin Ritz was joined by his younger brother Edward Ritz, who is David Ritz's father, and the business expanded to a photo-processing lab at 11th and G streets NW in the District. The following year, the brothers set up shop in Baltimore and began selling cameras.

David Ritz, who took over in 1969, expanded the retailer into 800 stores in 40 states by acquiring regional camera shops and film processing chains, including Fotomat. But the company faltered when customers shifted away from photo processing, which was highly profitable, to digital photography.

Earlier this year, the chain appeared to be following the same path as Circuit City, once the nation's second-largest electronics chain, which filed for Chapter 11 bankruptcy protection, was liquidated and closed in March after failing to find a buyer.

Ritz also filed for bankruptcy protection, in February, indicating it owed more than $60 million to numerous creditors, including Nikon and Canon USA. In a move to pay on its debts, Ritz closed about 400 camera shops and all 130 of its Boater's World Marine Centers stores.

But David Ritz resuscitated the family business over the summer. He assembled a team of investors who prevailed in a 43-round, 23 1/2 -hour auction with a top bid of $33.1 million.

Now Ritz officials are working aggressively on a comeback. They have obtained a $25 million revolving credit facility from PNC Bank to finance expansion. They opened five new stores last month in Boston, Atlanta, San Diego, Tampa and Jacksonville, Fla., and they say sales are up in the 300-store chain. Next year, they plan to open three other stores and later possibly reopen some of the shops that were shuttered.

Ritz's new president, Stephen M. LaMastra, said the company's challenge is to maintain its strong reputation for customer service and distinguish itself among the retailers selling similar gear. The company, he said, is trying to do that with several offers: free pictures for two years for customers who buy cellphones and a free DVD player and two DVDs of their photos for those who buy TVs.

"People are looking for value but also gifts that are meaningful and lasting," LaMastra said.

So far, the results have been promising. David Ritz said business has shown strong growth since July.

"Business has been very good, even though it's not the greatest economy," he said.

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