Report: Circuit City Mulling Closure of 150 Stores, Massive Job Cuts
October 20, 2008 3:02 PM
comment(s) - last by
This one is going to hurt
Circuit City, the nation's second largest electronics retailer, has been struggling badly in its attempt to compete with industry leader Best Buy. It replaced its chief executive last month and withdrew its financial outlook for the entire year citing traffic declines, stronger competition and a weak brand, along with a particularly large second quarter loss. Since Q2 2007, Circuit City has only been profitable for one quarter.
Wall Street Journal
report, citing sources close to the company, says that
drastic measures may be taken
to put the electronics retailer back on course. Circuit City is reportedly considering closing 150 stores and cutting thousands of employees. The move would allow Circuit City to liquidate $350M USD in assets and possibly avoid Chapter 11 bankruptcy.
The cuts could help Circuit City pay off its leases on its various properties, including its abandoned sites and then renegotiate leases on the remaining stores.
However, the company may consider Chapter 11 bankruptcy protection as an alternative to or in addition to the possible closures. The company has reportedly hired Skadden, Arps, Slate, Meagher & Flom LLP as its bankruptcy counsel, the firm that handled Kmart's Chapter 11 filing. It has also hired FTI Consulting Inc. to generate an emergency turnaround plan, and Rothschild Inc. to seek out emergency financing in the banking market.
Early this year, Blockbuster Inc. made a
$1.35B USD bid for Circuit City
bid was later withdrawn
, with Blockbuster citing market changes. With the recent troubles another merger may not be out of the question, though.
Shares of Circuit City stock have dropped 90.7 percent since the year's start due to the plethora of bad news.
Circuit City's current predicament may remind many of CompUSA’s decline. At its peak, CompUSA had hundreds of locations. Faced with falling sales, the company was
sold and closed virtually all of its locations
. The company brand and its 16 remaining stores
were bought by Systemax
, owner of the e-tailer TigerDirect. The CompUSA brand currently has 23 open stores.
If Circuit City were to exit the market,
Best Buy would have a virtual monopoly
over large, nationwide brick-and-mortar electronics stores. It would still face competition, though from smaller stores like Fry's, RadioShack, and the remnants of CompUSA and Circuit City. It would also continue to face growing pressure from online retailers like Newegg who have shown steady growth.
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RE: Mixed bag.
10/20/2008 5:52:37 PM
Prices here on the very last day of the local CompUSA store's liquidation were still higher than one could buy the stuff most elsewhere. Duh.
RE: Mixed bag.
10/20/2008 6:05:50 PM
At my CompUSA for the first few weeks of liquidation they jacked the original price up over MSRP, then took of tiny percentages off...especially big sellers like hard drives. Later on they dropped the prices down to around MSRP and gave fairly decent percentages off of the type of stuff I was looking for, mainly Power Supplies. I got an HX620 for $100 straight up. Even with rebates they are more expensive than that at the moment. If I had waited another week or so I would have probably gotten it for $80 (except mine was the last on the shelf). However the fast moving stuff was already gone, probably sold off wholesale.
RE: Mixed bag.
10/21/2008 8:49:10 AM
I got the same PSU for the same price. Was the only component they had which was cheaper than Newegg.
“Then they pop up and say ‘Hello, surprise! Give us your money or we will shut you down!' Screw them. Seriously, screw them. You can quote me on that.” -- Newegg Chief Legal Officer Lee Cheng referencing patent trolls
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