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  This bid was later withdrawn, with Blockbuster citing market changes.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

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My $0.02
By FranksAndBeans on 10/21/2008 1:10:20 AM , Rating: 2
CC is doomed, it is a similar situation to GM. There are just too many flaws and while the outfit is salvageable the chances of them somehow implementing the correct combination of fixes is just impossible.

Frankly, I'll be sad to see them go because an electronics store that isn't moving product, happens to have great deals on all the "old" product they have to clear out. If you know what you are looking for CC clearance deals are just wonderful, and despite what many people may think, CC will still dicker on pricing if you are smart about it. And though it is a cliche, any loss of competition is bad for the consumer. BB's prices haven't gotten better as they've gotten bigger.

CC stores are grungy and even if they are right across the street from a BB, they manage to be in the run-down shopping center. Housekeeping and appearance matters to the high spending shoppers that buy monster cables & top tier products. BB knows this, they've even said they don't care to have bargain hunters. It hasn't hurt them.

In my large metro area, maybe 2 of the 10 CC shops are actually ran by someone who cares. The difference in appearance, stock management, sales approach, display quality, etc. are night and day. This can't possibly be the result of any sort of corporate policy, the disparity is just too big. Maybe salary differences are large from location to location, I'm not sure. But a store is clearly only as good as its management team and resultant worker discipline. If you don't spend the money on quality people, the business can't work unless it has an exclusive product.

In the 8 badly ran CC's... it really is work to buy something unless it is a pickup and carry item you can take to the register. Display rooms aren't setup and systems are half setup or missing parts. Anything that requires salesman involvement is so much more painful than it should be.

Sorry CC. My bargain hunting self is going to really miss you.

RE: My $0.02
By HOOfan 1 on 10/21/2008 7:52:49 AM , Rating: 2
"CC stores are grungy and even if they are right across the street from a BB, they manage to be in the run-down shopping center. Housekeeping and appearance matters to the high spending shoppers that buy monster cables & top tier products."

In my area, the exact opposite is true. Circuit City is constantly remodeling their stores to keep them neat looking, while the Best Buys look like a messy Wal-Mart, with products slung all over the place and out of their home locations. Circuit City employees actively seek you out, but Best Buy employees are too busy gabbing with each other to help you, and when they see customers coming, head the other way. Not to mention when you get one that does want to help you, they don't know that much.

CompUSA however had the worst customer service in my area and now they are gone.

RE: My $0.02
By Spivonious on 10/21/2008 7:56:36 AM , Rating: 2
heh, both CC and BBY in my area are like your BBY.

"This is from the It's a science website." -- Rush Limbaugh

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