Circuit City Stores Inc. (Richmond, Va.) has announced plans to close 155 stores – about 20 percent of its chain – in an effort to avoid bankruptcy and return to profitability.
The nation’s second-largest consumer electronics retailer also said it is considering all available options and alternatives to restructure its business.
The 155 stores are in 12 markets. The closings will be completed by Dec. 31, 2008, laying off about 17 percent of the retailer’s domestic work force.
Circuit City also said it would further reduce store openings and planned to work with landlords to renegotiate leases, lower rent or terminate agreements.
“The weakened environment has resulted in a slowdown of consumer spending, further impacting our business as well as the business of our vendors,” said vice chairman and acting ceo James Marcum. “The combination of these trends has strained severely our working capital and liquidity.”
Circuit City has had only one profitable quarter in the last year, posting a wider second-quarter loss in September with a 13 percent decline in same-store sales. The retailer has been under new leadership since late September, when ceo Philip Schoonover agreed to step down.
The company said it expects the stores it is shuttering, which generated about $1.4 billion in net sales in fiscal 2008, will not open today and will begin store-closing sales tomorrow (Wednesday, Nov. 5, 2008).
A Circuit City spokesman said the decision to pull out of 12 markets was based on store performance. “There are some markets where we have more competitors, there are some markets where we have less competitors, in all, we’re closing 155 stores that were underperforming,” he said.
Among the factors cited by the company for its actions were waning consumer confidence and a significantly weakened retail environment; its worsening liquidity position; restrictive actions taken by some of its vendors; and the disrupted financial markets, which have caused certain of its vendors to experience difficulty obtaining credit insurance for the company's purchases.
In addition, Circuit City said it has been unable to collect an income tax refund of approximately $80 million that it believes it is owed from the federal government.