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  This bid was later withdrawn, with Blockbuster citing market changes.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

RE: Mixed bag.
By Hiawa23 on 10/21/2008 8:55:07 AM , Rating: 2
I have shopped at both CC & BB for 15 or so years, & BB has always appealed more to me, everything from it's brightly lit stores, the layout, I have always been a Bestbuy fan & mostly all my elctronics, music, DVDs, videogames are bought from them. Rewardzone has been rewarding, & many have seen the decline of Circuit City coming for years now. I hope they don't fold cause my first option is usually Best Buy, then Circuit City 2nd, but generally most of the BBs I go to, the stores are clean, everything is organized, videogames up to date, then you go to CC & it's the total opposite.

RE: Mixed bag.
By ShaolinSoccer on 10/22/2008 12:35:29 AM , Rating: 2
Circuit City just has bad management. They pretty much let their employees be lazy and that just looks bad. One thing though, they have good clearance sales. I have bought many things from CC these past few months. Bought Crysis for $20. A 4GB pro 2 duo memory card for $25 that works fine in the Sony PSP I bought from CC. Bought my first intel PC back in 1999 from CC for a very good price. Lots of other stuff. Right now they got a PC games clearance going on. You can buy City of Heroes for $4.99. Some games are less than a dollar. If they close the store here where I live, that will be bad news for me. I been shopping there since I was 15 and I'm now 36. So this really is bad news to me...

"You can bet that Sony built a long-term business plan about being successful in Japan and that business plan is crumbling." -- Peter Moore, 24 hours before his Microsoft resignation

Latest Headlines
Inspiron Laptops & 2-in-1 PCs
September 25, 2016, 9:00 AM
The Samsung Galaxy S7
September 14, 2016, 6:00 AM
Apple Watch 2 – Coming September 7th
September 3, 2016, 6:30 AM
Apple says “See you on the 7th.”
September 1, 2016, 6:30 AM

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