Shop Talk

Retailers, consumers and prices

Check Out Line: Short-Circuit City

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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)

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