When it comes to retail electronics, the two big kahunas have been Best Buy and Circuit City. Well, now Best Buy must be pretty happy because Circuit City is filing for Chapter 11 bankruptcy protection. This makes them the first major retail casualty of the U.S. economic downturn.
Last week, it was announced that the chain would be closing 155 stores across the country. That move was meant to stop the hemorrhaging of cash and hopefully have it avoid bankruptcy. That was the intention, and Rich in his post agreed with the folks at Circuit City that it doesn’t mean they’re going out of business.
The problem is that news like that only adds to the notion that the company is in trouble. And when the stock market opened this morning at 9:30 AM, Circuit City stocks dropped down to only 11 cents per share. The New York Stock Exchange halted trading on the stock early.
The odd thing about this is timing. It is happening BEFORE the holiday season. Very ironic considering that the holidays are likely to bring in a huge influx of cash. But, the chain has been having a hard time paying vendors. They owe $119 million to HP, for example, and another $116 to Samsung. Vendors were rightly concerned that the store wouldn’t be able to pay their bills, and that idea was bolstered with news of the 155 store closings.
Circuit City has been losing market share to Best Buy and Wal-Mart. Sales are slowing and the company is reporting losses. Not so good.
As with any bankruptcy, this doesn’t mean the chain is done. Stores will remain open during their reorganization.
With every downturn, there are the survivors and then everybody else. Which Circuit City ends up being, we just don’t know yet.
David Risley is the founder of PCMech.com. He is the brains, the thinker, the writer, the nerd.
The last 12-18 months have been nothing but problem after problem for CC, which is a terrible shame to all employees, most importantly those in the stores.
Many lost their jobs only to be offered the same position 6 months later at a lower rate of pay while Philip Schoonover (ex chief executive) received approximately $1.8 million as part of his severance package in late September. He was only with the company from 2004 and the stupid board of directors signed the paperwork to approve the deal!
If it get’s to the point of filing for Chapter 7 and Circuit City has to close their doors for good, Best Buy will no doubt eat up most of their share of the customer base. But for the sake of the employees, what with the state of the economy and the 1.2 million jobs lost this year in the US alone already, I really hope Circuit City can pull a rabbit out of their hat and get back into the game.
There are layoffs but I still see thousands of high paying jobs.
http://www.linkedin.com (professional networking)
http://www.indeed.com (aggregated listings)
http://www.realmatch.com (matches jobs based on your skills)
Good look to the circuit city folks!
Besides the economy, people are more and more ordering big ticket electronic items online.
I used to really like Circuit City, before Best Buy became as popular as it is. The past couple years, every time I walked into a Circuit City, it looked depressing. I don’t know what specifically makes a store appear this way, I just know the feeling I got by being in the store. I don’t think CC is coming back. People are very price sensitive in tough economic times and with the internet providing these great deals.
‘Why Circuit City Busted, While Best Buy Boomed’
http://www.time.com/time/business/article/0,8599,1858079,00.html