Circuit City, the nation's second-largest electronics store, said it will reduce its workforce 17 percent, close stores in 55 U.S. markets on Tuesday, and begin a liquidation process on Wednesday. Plans to open 10 new stores next year have been canceled. As of February, Circuit City had about 46,000 employees worldwide.
"We deeply regret the impact today's announcement will have on our associates, our guests, and the communities where these stores are located," said James Marcum, acting chief executive of Circuit City Stores. Marcum replaced ousted Circuit City president, CEO and Chairman Phillip Schoonover, who was let go last month after just two years at the company.
The news comes on the heels of a decision by Blockbuster not to acquire Circuit City for $1 billion.
"Since late September, unprecedented events have occurred in the financial and consumer markets causing macroeconomic trends to worsen sharply," Marcum said. "The weakened environment has resulted in a slowdown of consumer spending, further impacting our business as well as the business of our vendors. The combination of these trends has strained severely our working capital and liquidity, and so we are making a number of difficult, but necessary, decisions to address the company's financial situation as quickly as possible."
Economy and Business Decisions
Circuit City Stores said its second-quarterly results, its liquidity position, and the poor economy led vendors to impose restrictions on payment terms and credit for the company.
Executives say the unstable financial market contributed to the company's demise by denying vendors credit insurance for Circuit City's purchases. As a result, vendors were asking for payment before products were shipped, according to the company. Vendors also put the brakes on credit made available to customers for holiday purchases. In fiscal year 2008, the stores being closed generated $1.4 billion in net sales.
Another reason for the restructuring is the inability of Circuit City to collect an income-tax refund of $80 million owed by the federal government, according to the company.
What to Expect
The consumer electronics company said it plans to reduce operations in the 566 stores remaining open, but will work with customers on the transition via its Web site and through its call-center service 1-800-843-2489.
Stores on the company's hit list, which include 24 in California, 19 in Georgia, and 14 in Illinois, will not open Tuesday and closing sales will begin on Wednesday. Sales are expected to continue until the end of the year, according to the company.
Circuit City is encouraging customers with installations scheduled for after the closings to contact the company and reschedule. Circuit City also said it will honor gift cards and store credits.
Via Yahoo
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