Circuit City to liquidate assets, close stores, lay off 30,000

Richmond (VA) - Circuit City announced today that in response to their inability to find a buyer, they will liquidate assets and close down all 567 U.S. stores, and will lay off all 30,000 workers. Canadian portion of business may remain viable, though still unknown.


Said Circuit City's acting CEO, James A. Marcum, in a statement, "This is the only possible path for our company. We are extremely disappointed by this outcome."

The weakened global economy may be as much to blame as anything for Circuit City's closure. The company searched eagerly for a way to refinance debt, or to find a buyer. However, nothing was possible. "Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders," Marcum said.

They have now appointed Great American Group LLC, Hudson Capital Partners LLC, SB Capital Group LLC and Tiger Capital Group LLC as liquidators. U.S. Bankruptcy Judge Ken Huennekens has given final approval of the liquidation plan.

Employees were notified today when they would lose their jobs. Some stores will begin close-out sales starting tomorrow (Saturday).

It is presently unclear what will happen to the company's retail stores and dealer outlets in Canada. Circuit City has 765 such stores there. A lawyer, Gregg Galardi of Skadden, Arps, Slate, Meagher & Flom LLP, told the judge that there are still open bids for the Canadian business.

Shareholders are likely to receive nothing, which is a typical action in bankruptcy cases.

CLOSEOUT AT CIRCUIT CITY

By JAMES COVERT

Circuit City has shorted out for good.

The nation's second-biggest electronics chain, which had filed for Chapter 11 in November, said it will begin liquidating its stores today after it failed to reach a deal to sell the company.

The 60-year-old retailer last year hired Goldman Sachs to find a white knight for its struggling business. During the summer, Circuit City briefly flirted with video-game giant Blockbuster on a prospective merger that had been pushed by billionaire financier Carl Icahn.

Circuit City most recently had drawn interest from buyout firm Golden Gate Capital, as well as Mexican media tycoon Ricardo Salinas Pliego. While negotiations lasted past midnight Thursday, Circuit City said it couldn't secure the necessary financing.

"This is the only possible path for our company," said acting Circuit City CEO James Marcum. "We are extremely disappointed by this outcome."

Circuit City - whose demise will leave more than 30,000 employees jobless - is the latest casualty of one of the worst holiday seasons on record for retailers. Hit by a sharp pullback in shopping demand for big-screen TVs, digital cameras and DVD players, Circuit City likewise was crippled by tightened credit from suppliers.

Going-out-of-business sales at the company's 567 stores will lure customers away from arch rival Best Buy in the near term.

But increased market share could add 50 cents to Best Buy's earnings per share next year, estimated Anthony Chukumba, an analyst at FTN Midwest Securities.

It's not clear whether Circuit City's prices on big-ticket items like flat-screen TVs will go still lower as it liquidates its stores, sources said. That's because liquidation firms have become sophisticated when it comes to promotions.

Still, economic woes including the worsening employment picture make still-lower prices a good bet.

Industry experts say Circuit City won't be the last chain to disappear as the recession wears on.

Already over the past year, the economic crisis has claimed as victims major retailers including Linens 'n Things, KB Toys and Mervyn's, a discount department-store chain that had operated stores across the Southwest. james.covert@nypost.com

Circuit City to close 155 stores

Circuit City Stores announced Monday it plans to close 155 stores and lay off 17 percent of its workforce in the U.S., as it aims to restructure its business amid a tightening credit market and downturn in business.

Over the past few weeks, the retailer's financial health has become more dire and, according to a report in The Wall Street Journal, was considering restructuring moves as a means to avoid a Chapter 11 reorganization bankruptcy filing.

(Credit: Circuit City Stores / Richard Cadan Photography)

The struggling electronics retailer noted in its announcement that not only have its sales dropped amid an economic slowdown and loss in consumer confidence, but also its suppliers have begun cutting back on the level of credit they are extending to the retailer.

"The current mix of terms and credit availability is becoming unmanageable for the company," Circuit City noted in its announcement.

That cutback by suppliers comes at a critical time for Circuit City, as it heads into the holiday buying season when it wants to replenish its stock with the popular items.

The company plans to begin a liquidation sale at its 155 stores targeted for closing (PDF) on Wednesday and is expected to continue the sale through the rest of the year.

Circuit City also plans to scale back plans to open new stores to two from 12 in the current fiscal year and suspend all store openings for 2010. The company will continue to operate in 153 U.S. markets and overseas, but will be exiting 12 U.S. markets as a result of the restructuring.

Other woes for Circuit City include a potential delisting of its stock from the New York Stock Exchange. Last week, the NYSE warned the company its stock price had fallen below $1 for 30 consecutive trading days, a trigger point for a potential delisting.

The NYSE warned the company on Oct. 24 and Circuit City has 10 days to resolve the issue. One common means that companies use in this situation is a reverse stock split, in which investors who hold a certain number of shares can swap them for a single share in the issuer's stock. For example, 10 shares of stock trading at 50 cents each would become 1 share that trades at $5 a share.

Circuit City Lets us Down

For years I've been an avid fan of the electronics retailer Circuit City, considering it to be the alternative to big-box behemoths Best Buy and Wal-Mart. But no more. Circuit City has joined the list of "worker abusers" with its recent announcement that it would layoff 3,500 experienced employees whose only sin was being too good at their jobs...

Circuit City targets better-paid workers for layoff

A new plan for layoffs at Circuit City is openly targeting better-paid workers, risking a public backlash by implying that its wages are as subject to discounts as its flat-screen TVs. The electronics retailer, facing larger competitors and falling sales, said Wednesday that it would lay off about 3,400 store workers — immediately — and replace them with lower-paid new hires as soon as possible. The company will lay off 33 workers in eight St. Louis area stores. The laid-off workers, about 8 percent of the company's total work force, would get a severance package and a chance to reapply for their former jobs, at lower pay, after a 10-week delay, the company said.

Analysts and economists said the move is an uncertain experiment that could backfire for the chain. They say morale could sink and customers could avoid the stores. Also, knowledgeable customer service is one of the few ways Circuit City can tackle competitors that include Wal-Mart Stores Inc., they say. "This strategy strikes me as being quite cold," said Bernard Baumohl, executive director of the Economic Outlook Group. "I don't think it's in the best interest of Circuit City as a whole." While other companies have introduced two-tiered wage systems, where newer workers make less, firing workers and offering to rehire them at a lower wage is rare. "I don't think you're going to find too many examples," of this, said Ken Goldstein, labor economist for the Conference Board, a business research group. "That certainly has not been a trend we've seen." Circuit City, the nation's No. 2 consumer electronics retailer behind Best Buy Co., says the workers being laid off were earning "well above the market-based salary range for their role." They will be replaced with employees who will be paid at the current market range, the company said in a news release.