A Bullet in the Temple for Circuit City

The nation's No. 2 electronics retailer got the coup de grace today. Bankrupt Circuit City announced it was liquidating, eliminating 567 stores and about 30,000 jobs.

Circuit City was done in by weak holiday sales which also forced retailers such as KB Toys, Goody's Family Clothing and Gottschalk's Inc. into bankruptcy.

Circuit City, born in the late 1940s with the advent of television, had been an innovator by creating customer-friendly benefits such as loaner TVs when a set was being fixed and noting the massive demographic shift to suburbs and how that offered mass discount opportunities. In its early years, the firm became a leader in store placement, merchandise display and pricing.

So powerful would Circuit City's performance become that it won accolades in the bestselling 2001 business book "Good to Great." One dollar invested in the company in 1980 would have yielded $80 just 10 years later, a performance better than Coca-Cola or IBM, according to author Jim Collins. He added: "From 1982 to 1999, Circuit City generated cumulative stock returns 22 times better than the market, handily beating Intel, Wal-Mart, GE, Hewlett-Packard and Coca-Cola."

But Circuit City is also classic example of C-Suite ineptitude. Starting in the late 1990s, it lost its sense of direction by playing it cozy and warm. It created a successful spin-off, CarMax, and then let it take away its best managers. It was slow to see the threat of No.1 challenger Best Buy and let a succession of top executives play musical chairs throughout the last decade while doing incredibly dumb things, such as laying off most of its experienced sales staff.

The Richmond, Va.-based firm's board, which includes such people as a University of Notre Dame business school professor, twice ignored hedge fund takeover attempts, which were actually serious warnings of trouble. Its next-to-last CEO, Philip Schoonover, was a disaster who played cut-back games, including another bloodletting of his sales staff. He was forced out in September just weeks before Circuit City declared bankruptcy.

If ever there was a tale of retail mismanagement this is it. As Alan Wurtzel, who was CEO until the 1980s and whose father founded the firm told me: "I feel terrible for both the people who have lost their jobs and will and for the legacy of my father."