Shop Talk

Retailers, consumers and prices

Check Out Line: Short-Circuit City

November 10, 2008

Check out Circuit City’s bankruptcy filing.
 
It’s been expected for some time, but Circuit City on Monday said it filed for Ch. 11 bankruptcy reorganization.
 
The thing is that there is some doubt about whether reorganization will work.
 
“We would note that we have not seen a consumer electronic retail(er) successfully reorganize in Chapter 11 in our 24 years in this space,” Credit Suisse analyst Gary Balter said. 
 
“One reason is that consumers become reluctant to buy extended service warranties from chains in bankruptcy and ESP’s are a key part of the profit formula,” he said in a research note.

Tweeter filed for bankruptcy protection in June 2007 and was later bought by Shultze Asset management.  But that chain filed for Ch. 11 again last week.
 
There are a lot of places out there to buy flat screen TVs, DVD players, video games and the like and that competition from Wal-Mart, Best Buy and others is one thing that put pressure on Circuit City.
 
Circuit City lost money in five of the last six quarters and as the global credit crunch pinched suppliers, those suppliers have tightened credit terms.
 
Circuit City already said it is shutting down 155 stores.  But the bankruptcy filing is a sign the company didn’t even have time to wait through the key holiday shopping season before reorganizing.  Or the weakened economy could just mean that there wouldn’t have been enough demand to matter.
 
So Circuit City hits the reset button and hopes it isn’t “Game Over.”
 
Also in the basket: 
 
Hard times for European luxury firms (WWD, subscription required)
 
McDonald’s Oct. same store sales rise 8.2 pct
 
Tesco shares fall on Asia slowdown worries

(Reuters Photo)

Comments

so what will or expected to happen next?

Posted by Gregor McAlen | Report as abusive
 

Remember when Circuit City was a favorite in “Good to Great” by Jim Collins? Remember when we thought being big gave you clout with customers and vendors to produce long-term returns (Michael Porter’s 5 Forces Model)? It’s time we recognize that the old approach to management doesn’t work in a rapidly shifting competitive world. There are winners in today’s market, but they follow a different approach. Read more at http://www.ThePhoenixPrinciple.com

 

I’m new to this, anyone know what will happen to my 1,000 shares? A total loss?

Posted by Ron | Report as abusive
 

We gathered more data about the closed stores, as well as an interactive map, here:
http://www.retailerdaily.com/entry/mappi ng-circuit-city-store-closings-target-sp ecific-states/

 

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 luck to the circuit city folks!

Posted by Matthew | Report as abusive
 

Buyer beware with these stores. Any deposits you had with them are now possibly lost. This is a rip off!! Why can they accept gift cards, but not refund my deposit money? I put down 2500.00 via check, and they wont give my money back..they claim i have to wait for the bk to go through….this is BS.

Posted by JoeP | Report as abusive
 

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