Print 73 comment(s) - last by mindless1.. on Oct 23 at 1:43 AM

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.

Now a 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.  This bid was later withdrawn, with Blockbuster citing market changes.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.

Comments     Threshold

This article is over a month old, voting and posting comments is disabled

Smaller stores like Fry's?
By djreedps on 10/20/2008 6:07:15 PM , Rating: 2
The author of this article has obviously never been in a Fry's Electronics store. The Fry's stores in terms of square feet and selection of products are huge. The Fry's chain has a smaller number of stores than Best Buy, but that is not what the author said.

As for Circuit City, they needed to figure out what the customer wanted. The last time I went to a Circuit City to buy something, I was attacked by at least five different salespeople within five minutes. I got very angry and walked out. The Circuit City stores also have no ambiance. They are incredibly brightly lit, with little color. The floors are hard tile instead of softer carpet or plasticized tile. Fry's also has brightly lit stores, but at least Fry's has a theme for each store.

I will not be sad to see Circuit City close. They seemed to want to tell the customers what we wanted instead of listening to us.

RE: Smaller stores like Fry's?
By strikeback03 on 10/21/2008 8:55:24 AM , Rating: 2
umm, it's a store, not a coffee shop. Shouldn't it be brightly lit? Our old CC had tile in the main corridors and carpet between racks of stuff, haven't been far enough into the new one to see.

RE: Smaller stores like Fry's?
By Hiawa23 on 10/21/2008 11:00:29 AM , Rating: 2
I don't agreee with some of the staements some have made that paint most consumers as dummies. I consider myself well informed about all the electronics I buy. I buy stuff on the online sites, usually small stuff, but I like to go out to the stores & see the products, just me, I know, probably the minority, especially for items like TVs, & electronics.

RE: Smaller stores like Fry's?
By kattanna on 10/21/2008 11:18:12 AM , Rating: 2
maybe they have only been to a frys in places like arizona where they are in fact grocery stores.. LOL

always makes me laugh when i go visit my parents.

"If you mod me down, I will become more insightful than you can possibly imagine." -- Slashdot

Copyright 2016 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki