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TWST: Doug, first of all, what is your definition of a hard lines retailer?

Mr. Gordon: It’s a broad term, but to start it is a retailer that sells non-apparel goods and excludes the department stores and also the more broadline-focused retailers.

TWST: From an investment and a business standpoint, are there characteristics associated with hard-lines retailing that are different from those associated with soft-lines retailing?

Mr. Gordon: Yes, of course. First of all, there isn’t a big fashion element in the inventory, which makes it a little bit more consistent a business with less of a focus on whether the merchant and the head buyer are more fashion-forward. However, product assortment and purchasing are also critical with hard-lines retailing.

TWST: There are, I suppose, fads, rather than fashions.

Mr. Gordon: Yes. A good example would be in the consumer electronics space: if you missed the MP3 players right now, you’d be missing out on some very important sales.

TWST: To what extent has a rising interest rate environment impacted the companies in your sector?

Mr. Gordon: Well, both consumer electronics and home improvement have had cyclical cushions that have helped to offset what has been a slowing in consumer spending. But in general, while some of the upside has been removed, many of these companies are still producing very solid numbers and, in some cases, are still exceeding estimates.

TWST: How do you see the valuation of Best Buy’s (NYSE:BBY) stock?

Mr. Gordon: This is a very volatile name, and, when you look at it on a monthly basis, I think it’s very difficult to judge. But given the industry background and the opportunities and the way Best Buy has been operating, literally on all cylinders, I think the valuation is very attractive even today. I have a 110 price target.

TWST: What will it take to get some improvement at Circuit City?

Mr. Gordon: I hear good things about their new store format and I think they’re moving in the right direction by taking out appliances and trying to increase their focus on what I would call more core categories. The big issue there, in my opinion, isn’t whether or not that’s the right move; it’s really more a question of their ability to generate traffic and bring in the customer and show the customer that they have improved their consumer electronics and PC collections. So it’s going to take a lot of hard work in order to make sure that they execute and they can get the consumer electronics consumer back into the stores.

TWST: Do both companies have an Internet strategy?

Mr. Gordon: They do. They differ a little bit, but quite frankly, the Internet so far hasn’t been a really significant contributor to sales or earnings. In fact, in Best Buy’s case, it’s actually going to be pretty dilutive to earnings this year.

TWST: Why so?

Mr. Gordon: Because they’re building their site and they know that it’s going to take some money to advertise it and get their strategy off the ground. They’re really going to try to have a separate strategy for it. Also they’re getting some help from some of their vendors, most notably Microsoft (MSFT), in order to defray some of the costs.