Circuit City To Close 155 Stores, Cut Jobs

As Many As 7,300 Workers To Be Laid Off As Electronics Chain Pulls Out Of Dozen Markets

(AP)  Circuit City Stores Inc. said Monday it is closing about 20 percent of its U.S. stores and cutting thousands of jobs in an effort to return to profitability as it finds consumers reluctant to spend and its vendors less eager to give it credit.

The nation's No. 2 consumer electronics retailer said it will shut 155 of its more than 700 stores and leave at least a dozen markets entirely, including Phoenix and Atlanta, by Dec. 31. It will lay off about 17 percent of its domestic work force, which could affect up to 7,300 people.

Circuit City also said it will further cut back on new store openings and plans to work with landlords to renegotiate leases, lower rent or terminate agreements while it deals with tightening credit from its vendors.

The moves renewed the specter of bankruptcy hanging over the Richmond, Va.-based company as it heads into a holiday shopping season that could determine its future, amid slower consumer spending that has even the least vulnerable retailers worried.

"The weakened environment has resulted in a slowdown of consumer spending, further impacting our business as well as the business of our vendors," James A. Marcum, vice chairman and acting president and chief executive said in a statement. "The combination of these trends has strained severely our working capital and liquidity."

Marcum called the decision to close stores "difficult, but necessary."

Based on nearly 43,000 employees as of Feb. 29, 17 percent could be up to about 7,300 workers. But the company said the number would likely be lower in part because employees in some markets may become employed at other stores. It would not give further details.

Circuit City shares, which have traded under $1 for more than a month, rose 10 cents, or about 40 percent, to 36 cents in midday trading Monday.

The company said it expects the stores it is shuttering, which generated about $1.4 billion in net sales in fiscal 2008, will not open on Tuesday and store closing sales will begin Wednesday.

Circuit City spokesman Bill Cimino said the decision to pull out of 12 markets was based on store performance.

"There are some markets where we have more competitors, there are some markets where we have less competitors, in all, we're closing 155 stores that were underperforming," Cimino said.

Circuit City also noted restrictive actions taken by its vendors, including limiting credit for purchases. The company said it is working to secure support from vendors, but the "current mix of terms and credit availability is becoming unmanageable."

It also said it has been unable to collect an income tax refund of about $80 million that Circuit City believes it is owed from the federal government.

Standard & Poor's Equity Research analyst Michael Souers told investors that Circuit City's decision was "rational and necessary to attempt to conserve capital," but said restrictive measures by some vendors may "ultimately prove too challenging."

"We think there is a fair chance (Circuit City) will be forced to file for Chapter 11" bankruptcy protection, Souers wrote.

The company has had only one profitable quarter in the past year, posting a wider second-quarter loss in September with a 13 percent decline in sales at stores open at least a year. Its results have weakened as the company faces significant declines in traffic, heightened competition from rival Best Buy Co. and others and a weakened brand position.

Circuit City, which is exploring strategic alternatives, has also been working with advisers to determine how to substantially improve its operating and financial performance.

The company said last week it received a warning from the New York Stock Exchange that its stock price is not high enough for continued listing. The NYSE said the shares had an average closing price of less than $1 over 30 consecutive trading days as of Oct. 22, falling short of the exchange's requirement. Its shares have closed under a dollar since Sept. 30, when they fell to 76 cents. Shares have traded between 17 cents and $8.24 in the last year.

In order to regain compliance with the NYSE, Circuit City's common stock share price and the average share price over a consecutive 30-trading-day period must both exceed $1 within six months of it receiving the notice.

A major Circuit City shareholder - Classic Fund Management AG, a Liechtenstein-based asset management company - also said last week that it cut its holdings to 8.2 million shares, or about 4.8 percent of the company, from 9.5 million shares, or 5.6 percent.

Circuit City has been under new leadership since late September when Chief Executive Philip J. Schoonover agreed to step down. He was replaced by Marcum.

[willofla]

What the American consumer needs is a store that carries something "different" which these days is an alien word. I can''t find a store that doesn''t carry exactly the same thing that all the other stores carry. So we sure don''t need another store like Circut City that carries the exact same thing that all the other stores carry. And the real problem is there might be a dollar difference between all these stores. That''s not "competition", another word that has been lefitized. Competition these days is building another store that sells the same thing all the other stores carry, but a dollar cheaper. The powers that be just don''t get it, the chain store management. They don''t ever think of selling stuff at a much lower price than another store just like them. Doing that might cause them to make their profit over a much longer time. See, that''s the way business used to be across the country. You got into business with the understanding that you won''t be seeing a real profit for at least the first ten years. But today if these stores don''t start making all the profit they can make the first few weeks or months, then the store management must''ve made a bad mistake somewhere. Like to many companies these days it''s all about making all the profit to the max right off the bat. After all they have their stock holders to think about (sic).

[rational_1]

Think they''re in trouble now? Wait until Obama starts hiking their taxes so that they pay their ''fair share''. If you work for them, I''d suggest polishing your resume. Until (if!) you get your new job, you need not fear - the Obama-state will hold your hand, and make everything better.

[willofla]

Circut City is expensive, more than most. If you want a great deal on electronics there are other places to go like Best Buy. They are high but not as high as Circut City. In my town there are two. Their parking lot is always empty. I don''t know how they pay their bills, or their employees. These people who work there can get a job most anywhere that sells electronics, like Sears, or at some mall store, maybe even Best Buy or Wal Mart. So let them go because unlike Wall Street and the liberal Democrats, America is a country of equality, you''re equal to go out a find a job, work to make some money, and equal to fail also. That''s the part of what our country stands for that Obama will never tell his followers, that they can fail and no one will bail you out of your troubles because that is not Constitutional.

[pirmin3]

My experience with CC employees makes me glad they''re folding so many stores. A bunch of un-knowledgeable head hunters.

[oneworldusa]

The article fails to mention the sub-par customer service CC provides. CC apparently trains no employees with customer contact and hasn''t for years.

[txgrouch2007]

One less competitor for Wal-Mart and Bust Buy. Question - what will happen to prices when only one is left??
Posted by bob5ford at 04:56 PM : Nov 04, 2008

There HAS to be a WalMart. Who else would sell cheap products from China, now that WalMart forced Kmart out of business?

If WalMart raised prices, the Chinese would open their own ChinaMart and undercut WalMart.

That would not be a smart move for WalMart.

[tannerbird]

Just do not buy keep your money. If we can just get wall-mart to close we will be ok.

[tannerbird]

That is the thing to do if you cant stand the heat get out of the kitchen.

[docpeter1953]

So much for the daily morning pep rallies. sure gonna miss these adolesent gatherings.

[avigil2]

The problem with Circuit City is that their prices were a little too high for consumers while Best Buy always have competing prices.