Circuit City might close 150 stores, as possible bankruptcy looms

By Jacqueline Emigh | Published October 20, 2008, 6:24 PM

Circuit City is considering closing 150 stores or more, according to a report today. Even worse, the retailer could be facing bankruptcy if holiday sales fizzle as expected, say some financial analysts.

After posting a $162.7 million quarterly loss even before the financial crisis hit, Circuit City might either land in bankruptcy court or be forced to close more stores soon after the New Year, some financial experts are predicting.

Without a strong holiday season, Circuit City "significantly increases bankruptcy risk," said Michael Baker, an analyst at Deutsche Bank, in a note to clients at the end of September.

"The risks of bankruptcy are very real, in our opinion," concurred David Schick, an analyst at Stifel Nicolaus.

As previously reported in BetaNews, during a conference call with analysts about the dismal second quarter financial results, Circuit City Executive VP and CFO Bruce H. Besanko vowed that the retailer will launch a turnaround centering on an improved "customer experience."

Circuit City has proceeded to hire FTI Consulting Inc. to create a turnaround plan and investment bank Rothschild to try to come up with emergency financing, according to a report today in The Wall Street Journal.

The retailer is also contemplating closures of at least 150 stores, in addition to job cuts, said the WSJ.

"The management team, board of directors, and its strategic financial advisers are conducting a comprehensive review of all aspects of our business to determine the best methods of accelerating our turnaround," a Circuit City spokesperson responded in a statement today.

Meanwhile, industry leader Best Buy -- which keeps making more competitive headway vs. distant second-runner Circuit City - recently announced that it is working with top vendors to produce a new Blue Label line of laptops, expressly tailored to requirements voiced by its customers.

Comments

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Welcome to Circuit City, where service is state of the art!

Things have sure changed since the 80s.

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I can't believe they stayed open this long. Our local CC store opened around 1999 and has always had an empty parking lot. While across the street (literally) the Best Buy parking lot is packed every single day. How it could get that lopsided is beyond me. They both sell the same garbage and run the same ads in the newspaper. Maybe CC just couldn't manage or market well enough.

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Product and pricing have nothing to do with BB and CC being directly opposite on a given street and one (BB) being packed and the other (CC) looking like a ghost town.

It's all about store design, use of colors, and perceived image. There is always someone to greet to you (even though it's usually security) when you walk into BB and the stores have nice open air spaces and natural light. They make it like seem like a busy casino with the constant noise and music. At least BB seems alive when you walk in.

CC is like a maze with corners you can't see around. I hate it there and so does everyone else from the looks of it.

CC is like a funeral home with it's drab colors, relatively low ceilings, and total lack of design psychology. People go to BB even when CC has the same products at cheaper prices.

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Goodbye Circuit City, I never liked ya, and its time for you to go!

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Unless someone simply needs to make an impulse buy, there is little incentive to buy at local big box retailers as opposed to online.

And with the additional overhead required by the brick and mortar stores, they are at a strategic disadvantage.

But I do get a kick out of some preferring one store, be it CC or BB, over another. Given the choice I would go to CC first and forego the descent into hell that BB represents. But in the end, neither have very good prices nor selection. So its back to online sources we go...

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I also rarely buy stuff retail unless I need something immediately.(It is not often that I agree with you on something)

On most items(except for a few where the cost to ship is a significant percentage of the cost of the item) brick and mortar stores can't compete on price. They can still be competitive if they can convince customers that there level of service is worth a premium.(Which CC customer service is virtually worthless) Now to figure what people see in BB?

For items like a large TV or a large laser printer I think most people would rather buy locally if the premium is reasonable because it is much easier to get a replacement if you run into problems shortly after purchase. At best you will have to wait a few days to get a replacement shipped if you buy online. Many online retailer also won't reimburse you for the cost to ship the defective item back. At worst some vendors have very restrictive return policies that make it very difficult to return that 50"+ TV.

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No bailout?

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nothing in it for the gov't to save it. don't have good lobbyist.

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Best Buy is #1? #1 in what? I know its not pricing or customer service. Sales? I was in my local store yesterday looking at TVs just to compare picture quality since I buy all my TV's online, not because I'm too cheap, but because they mark up their tv's by 500%. They are ripping people off. Anyways. 7 Different employees came up to me offering to help and wanted to know if I had questions. They will not survive either.

In this economy the only survivor will be costco and walmart.

Bye bye CC AND BB.

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"7 Different employees came up to me offering to help and wanted to know if I had questions."

and this is bad custy service???

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ah yes, i recall my routine whenever i stepped in the store:

YES, I HAVE A QUESTION
WHY ARE YOU ASKING IF YOU DON'T KNOW
WHERE IS YOUR MANAGER

and of course i had the:

LEAVE ME ALONE !

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party,

There has to be one electronics store standing and it will be Best Buy. They aren't going anywhere.

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As a former CC employee, I was there when it all went down hill. Older, more experienced commission employees were phased out for younger untrained cheap kids. Despite this, I have always prefered CC to BB. BB has horrible customer service, the same untrained kids, and no reguard for their customers or employees because they know that they are number 1 and no one (except Walmart) comes close in volume. BB's only redeeming quality is Geeksquad which is wildly overpriced for the poor customer service.

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I was in our local CC with two teen age employees playing thier own rap music (complete with the N word and MF's)on a boombox while bouncing a rubber ball back and forth to each other across the aisle.

Both told me it wasn't thier department when I asked for help about a DVD I was looking for. I called CC corporate that evening and both my wife and I got on the phone and explained what happened.

Both were fired the next day.

That was the last time I set foot in a CC.

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Good riddance! Their customer service is one of the worst I've ever experienced.

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what customer service??

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It didn't help that they sold second-rate computer equipment, and when you wanted to buy a TV, the kids working there had no clue which one was better or what features they had.

Good riddance. Follow a NewEgg.com model -- let the people provide reviews, and trust me, the best stuff will sell. You don't need brick-and-mortar for these goods anymore.

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Agreed on their computer department. I don't go to a CC very often except maybe to look to get an idea of what the clueless masses are buying but their selection on computers and accessories is so limited that I am hard pressed to see even very naive customers buying most of their computer equipment there.

I think there is still a market for buying a lot of A/V products such as TVs, receivers, speakers, and the like at a brick and mortar stores because some customers prefer to make their purchasing decision based upon looking at displays at a few local stores rather than reading dozens of reviews on the products and hoping that there isn't some missing feature or flaw that would bother. Exchanges particularly on larger TVs is definitely a lot easier with a local reseller. If I purchase a TV and find that there are a bunch of dead pixels I could get the unit replaced the the same day.

Brick and mortar isn't for everybody but there will always be people whose time is worth more than the savings they might by get through a mail order company.

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Dont close mine...I like my fair competition...not like they ever had the best prices anyways...

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Good.

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That company fired their most experienced employees and replaced them with n00bs to save money.

Then they tried to convince people that their FireDog service could compete with GeekSquad.

How exactly is that going to happen when you have fired the most experienced, knowledgeable and loyal employees?

How are you going to have ANY credibility when you try to say that FireDog is worth the money?

Un-Freakin' believable. How do those managers keep their dang jobs when they make such incredibly stupid decisions?

I flat out don't understand how people like that rise to management positions and get paid high salaries and keep their jobs when they make pathetic decisions like they do.

Oh man...

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agree with you there braw !!!

CC used to have knowledgeable people, and only rushed to help if asked to, ..

now, i feel bombarded with what seem to be "seasonal" employees who seem to be blooming with zits and ignorance

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I flat out don't understand how people like that rise to management positions and get paid high salaries and keep their jobs when they make pathetic decisions like they do.

Clearly you haven't worked in corporate America. They *don't* keep their jobs. They do their damage and move on to the next job. These people aren't middle management. They're the executives, and they aren't there to stick around.

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I have indeed worked in corporate america.

Please do not make such flippant assumptions.

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"Circuit City might close 150 stores, as possible bankrupcy looms"

spell check aint wurkin?

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Nope

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:-), databaseben. Spell check [aint] working?

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