Circuit City to close 20% of stores
Ailing consumer electronics retailer says it will shutter 155 of its U.S. stores by year's end.
By The Associated Press
RICHMOND, Va. (WKTV/AP) - Circuit City Stores Inc. said Monday it is closing about 20 percent of its U.S. stores - cutting thousands of jobs - in an effort to return the nation's No. 2 consumer electronics retailer to profitability. However, the Circuit City in New Hartford is not one of them.
The Richmond, Va.-based company said it will shutter 155 of its more than 700 stores in 55 markets, including Phoenix and Atlanta, by Dec. 31, laying off about 17 percent of its domestic work force. Circuit City also said it will further reduce new store openings and plans to work with landlords to renegotiate leases, lower rent or terminate agreements.
The move comes as Circuit City heads into a crucial 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 officer 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 rose 14 cents, or about 54 percent, to 40 cents in early 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 on Wednesday.
Circuit City spokesman Bill Cimino said the decision to exit 12 markets was based on store performance rather than for competitive reasons.
"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. "We're taking this action because we're doing this for the future of the company."
Circuit City also provided updates on other aspects of its business, including restrictive actions taken by vendors, including limiting credit for purchases. But the company said while it is working to secure support from vendors, the "current mix of terms and credit availability is becoming unmanageable for the company."
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.
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 reviewing its operations while exploring strategic alternatives, has been working with advisers to determine how to substantially improve its operating and financial performance.
The company said last week that the New York Stock Exchange has warned it that its stock price is not high enough for continued listing.
The NYSE said Circuit City 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 in trading since Sept. 30, when they closed at 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 following receipt of the notice.
A major Circuit City shareholder — Classic Fund Management AG, a Liechtenstein-based asset management company — also said in a regulatory filing last week that it cut its holdings to 8.2 million shares, or about 4.8 percent, from 9.5 million shares, or 5.6 percent. It did not disclose a reason for the change.
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, who was tapped to oversee Circuit City's multi-year turnaround efforts.
On the Net:
Circuit City: http://www.circuitcity.com
(Copyright © 2008 The Associated Press. All rights reserved.)