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bid was later withdrawn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: My $0.02
10/21/2008 7:52:49 AM
"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
10/21/2008 7:56:36 AM
heh, both CC and BBY in my area are like your BBY.
"This week I got an iPhone. This weekend I got four chargers so I can keep it charged everywhere I go and a land line so I can actually make phone calls." -- Facebook CEO Mark Zuckerberg
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