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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  This bid was later withdrawn, with Blockbuster citing market changes.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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RE: Mixed bag.
By tehbiz on 10/21/2008 2:29:14 PM , Rating: 0
when was the last time you even entered a circuit city then? They are even trained to tell you that they dont make a commission, because they get paid hourly. When I used to do sales at circuit and bestbuy I always enjoyed selling to people like you. It didnt matter if you bought the extended service plan or not but that I made you admit that it was a good idea. that logically it _should_ be purchased whether or not you were going to.

As far as I know Circuit city uses a 3rd party for its service plans which would still be covered despite the company closing or filing bankruptcy. When i was there it was a company owned by GE but I have no idea if they switched after that.


RE: Mixed bag.
By Oregonian2 on 10/21/2008 7:29:18 PM , Rating: 2
If you look at my "original" comment, I said that the vast majority of the time my just saying "no" once was adequate. This includes purchases at both BB and CC, I didn't mean a specific store. The times where the salesman pushed beyond my "no" was at CompUSA (they did occasionally have some product that others didn't have in stock, so I had to buy there despite the prices). Didn't mention this because it wasn't relevant to what I was saying because I was talking both generically about the salesman situation (they have to act first) and talking about my real life experiences (that I didn't think arguable).

I did get pushed a little on the $150 HDMI cables at a BB subsidiary when I bought a $4400 plasma TV last year -- my reliability ploy doesn't work in that case. Just had to repeat "no" several times.

P.S. - You would NOT logically get me to say that in general the extended service plan was a good idea, because it's not (and Consumer Reports is someone you'd have to convince as well because they say "not" as well). There can be special cases where they are, but not generally.


RE: Mixed bag.
By techpro on 10/22/08, Rating: 0
RE: Mixed bag.
By Oregonian2 on 10/22/2008 2:47:43 PM , Rating: 2
I could write at length, but you don't know what you're talking about, and I'll leave it at that. But I'll leave with one point. If the probability of something failing is 1~2% (based on survey based statistics) and a service contract costs 15% of the product's cost, then it's a bad bet buying that contract. These are the actual stats of something I recently bought, btw, including the service contract price (3-year extension)). It's this statistical analysis that CR's opinion is based. As to cables, I'll just say that I'm an EE of thirty years design experience (who just went to a National Semi dog and pony show about their LVDS signal conditioning components that open up the eye patterns) and my confidence in evaluating cables is enough not to worry about your comments. Sorry about you getting axed at CC, their doing that is a huge blotch on the company in my eyes because I liked the folk there more than other places before their purge of experienced folk.


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