RSSCircuit City confirms massive store closings, layoffs
By Tim Conneally | Published November 3, 2008, 11:10 AM
Today, Circuit City confirmed earlier reports that it will be closing 155 stores as a cost-cutting measure, and eliminating 17% of its workforce, or roughly 7,800 jobs.
Following a quarter that showed the company worked at a $162.7 million loss, reports arose that Circuit City was contemplating store closures as a cost-cutting measure.
Today, the electronics retailer announced as a part of ongoing cost reduction initiatives that it is closing 155 stores and reducing new store openings. Further, the company says it is "considering all options and alternatives to restructure its business."
Bankruptcy is one of the more probable options. On October 24, the company was placed on a six-month warning of delisting from the New York Stock Exchange if the company cannot bring its stock to a value over $1.00 for more than 30 days in a row. Stock actually shot up in value briefly today, and settled at around 38% higher than yesterday's close. (Thanks to Kristopher for the correction --ed.)
"We deeply regret the impact today's announcement will have on our associates, our guests and the communities where these stores are located. We truly are grateful to each of our associates for their many contributions to the company." said acting president as of September James Marcum.
Marcum is holding the position of former Chairman, President, and CEO, Phillip J. Schoonover, who announced his resignation prior to the second quarter fiscal 2009 announcements that the retailer was drastically losing capital.
The company blames "unfavorable macroeconomic conditions and [its] deteriorating liquidity position," for the continued decline. Circuit City has been suffering for much of the decade, but many consider the company's fatal misstep the March 2007 dismissal of 3,400 of its highest-paid hourly employees to reduce operating expenses.
But this store closure calls for the elimination of more than double that number. According to the company, there were 45,885 employees as of February 29, 2008. Seventeen percent of that total amounts to 7,800 employees. (.pdf list of closing stores.)
The attempt this year for Blockbuster to buy Circuit City dissolved as Blockbuster's chairman and CEO called the acquisition "not in the best interest of Blockbuster's shareholders." However, Circuit City today said it's in negotiations with "lenders and other third parties regarding various financing alternatives," signifying the potential for another such buyout offer.
so are there going to be any "store closing blowout sales"?!
I want a list of which CC's in FL are going to shut down.
Score: 0
|Best Buys business is strong because they're selling Macs and iPods. Circuit City should have done the same now it's too late.
Score: 0
|I bought my Ipod (dec06) at CC.
Score: 0
|Wow, that's interesting, because here in Sarasota/Bradenton, Florida they just opened a big CC superstore. Right across the street from Best Buy and Super Target. Plus there is a WalMart Superstore and a Sam's Club within blocks. Can we say "over saturation?" Interesting placement for a company not doing so well.
Score: 0
|This is pretty awful news for the employees. It saddens me when people lose their jobs like this.
I think a thing that they did TWICE undermined their credibility in the service end of things.
Two times they made a list of their highest paid store employees and fired them because CC felt that they made too much money and hiring newbie employees would be good enough.
I disagree with the concept fundamentally, but in particular, I think it hurt their FireDog effort, and badly.
You WANT the employees that you are putting out there to market the Services end of the business to BE THE MOST EXPERIENCED people you have, don't you?
The margins on things like FireDog can be huge, and if you want to build a good reputation with consumers and have your FireDog service brand gain credibility, you cannot staff it with n00bs. You just can't.
Score: 0
|It's really a shame that the company had crashed and burned. I worked for them back in the early to mid 90's when CC was the big dog to fear.
Richard Sharp had it right. Low debt, pay in cash; a lean mean selling machine. Now he's collecting the cash hawking Croc's! :)
What really killed CC is simple. They got rid of the appliances (read: buyers with disposable income), remodel stores but forget to mention it (buyers thought cc went bankrupt) then destroy your dedicated commissioned sales force.
Being commissioned meant knowing your stuff frontwards and backwards so that when customers came in they knew we had our stuff down cold. Letting them go said to John Q. Public "Hey, we are know every bit as knowledgeable as the electronics guy at Wal-Mart."
Oh and don't forget about the tired old store format that looked great in the early to mid 90's but dated in the last 10 years.
I'm nostalgic but I don't feel sorry for them. They just got what they dished out when they were the new kid on the block putting one chain after another out of business when they came to town.
So, I'll put my cheesy little acrylic CC "Sales Excellence" award for 1995 back in the attic and think about what might have been. ;)
Score: 0
|What killed them was not evolving to compete with the online model where product mix, availability, and price are superior to their high overhead, screwy product mix, unavailability of product have doomed it to the dinosaur bin of business.
They have not even effectively leveraged a click and mortar model!
Debating what aspect of an inefficient higher cost brick and mortar business model is good or bad misses the point.
That is like arguing whether play time is what caused the Cassette format to be replaced!
The next to go will be Best Buy (hurry, please!). As so much of what is now considered specialized product is commoditized and will simply converge to become just another isle in WalMart.
Score: 0
|There will always be a demand for brick and mortar stores. It is going to be smaller than it once was but it won't completely disappear. People that want instant gratification or want a higher level of customer service will spend the premium.
The brick and mortar stores that will survive will have a high level of customer service and focus their marketing on those that will pay a premium for it. The stores like MicroCenter and other established stores that have a good reputation for customer service and have sufficent reserves to make it through the next few years will survive the long run.
I don't think Best Buy is in good shape in the long run but it's going to take at least 3-5 years before Best Buy really gets into trouble. BBY is currently making more each quarter than CC's market cap. BBY is going to have to lose a lot of market share before they are in the position CC is in now. The imminent collapse of CC will postpone BBY's woes.
Score: 0
|To any displaced Firedog Techs at Circuit City located in Livingston and/or Freehold, NJ. We're looking for a few good techs.
Please email resume to michelle@petethecomputergeek.com
Score: 0
|If you were a computer geek you'd at least make your website validate. But then it's always the ones who consider themselves to be geeks that are in fact not geeks at all.
Score: 0
|Hey,
"We come to you home or office."
Apparently they're fluent in Engrish as well. ;)
Score: 0
|Better question might be whether you want said "technicians". You might find a few decent techs at the local Circuit City who are a little weak on the resume but are highly motivated. Given the low wages I wouldn't expect to find too many such diamonds in the rough.
Score: 0
|lol nice find.
ooops..
Score: 0
|lol, hey actually its supposed to read like this...
"We come to you!"
"Home or Office"
Score: 0
|this is exactly what happens when you fire your most knowledgeable employees, and replace them with unqualified teenage idiots ... :)
Score: 0
|A valid point on paper, but i must admit to not noticing much of a real difference.
They still seldom have the item I need at a competitive price. And part of that is simply the cost of maintaining exorbitantly large brick and mortar establishments.
They would have done well to offer terminals where the merchandise not in stock could be drop shipped either to the home or to the store in 1-2 days without additionl charge - thus effectively increasing their inventory in a JIT fashion without adding to their carrying costs. But instead you get to look at a very strange CD/DVD product mix lacking the titles you want and far too much money tied up in a gadzillion bubble packs of memory simply tying up money sitting on the shelf.
So they tie up lots of money in slow moving product as we walk in and out of the store unable to find what we are looking for.
Lots of missed opportunity costs.
Very poor planning reflective of a pre-Internet marketing model.
And their 110% price match guarantee where you have to buy it, then return to present to them the better price rather than doing it at the point of sale is akin to recovering a rebate!
CC or BB - neither serve much purpose in my universe.
Score: 0
|"They would have done well to offer terminals where the merchandise not in stock could be drop shipped either to the home or to the store in 1-2 days without additionl charge"
Even that's fairly worthless, as you can just order it on the internet instead (usually for cheaper anyway).
Score: 0
|Yeah, if you don't go to the store to begin with!
But such terminal access would help them capture what would otherwise be a lost sale for the customer already in the store trying to give them their money.
Score: 0
|Meh. I would likely go home anyway and order it off the internet if it saved me having to go back to the store again (i.e. store drop-off).
If it were free home delivery I would consider it, but then you're in to the realms of me not having bothered going out to the shops in the first place if they didn't have an extensive selection of goods that could actually be bought on the same day at the shop. That's pretty much the sole reason for me bothering to enter large goods shops such as Circuit City/Best Buy or their European equivalents.
Either way, I think most large retail shops are doomed to being an internet presence only within the next 10 years.
Score: 0
|CC was already in trouble before February 2007. In the quarter that ended November 30, 2006 CC lost $16 million. For the fiscal year that ended in Februrary of 2007 they lost $10 million dollars. The bad pr from the layoffs certainly exacerbated the problem but I doubt that has a lot to do with their financial problems.
CC hasn't really paid their associates well in years. I had a friend in college, circa 2000, who was able to make $200+ on a good night in one of the more upscale locations. Times were better, they paid 2% commission, and there was a lot less competition. After they got rid of commission around 2002 or 2003 most of the better salesmen moved on to other companies.
Score: 0
|you mean to say majority of teenage idiots.
thankyou :P
Score: 0
|"unfavorable macroeconomic conditions and [its] deteriorating liquidity position"
or in other words "lack of forethought".
Score: 0
|