Circuit City Stores Files for Chapter 11

Circuit City Stores Inc. (Richmond, Va.) has filed a voluntary petition for reorganization relief under Chapter 11 of the U.S. Bankruptcy Code. The petition was filed in the U.S. Bankruptcy Court for the Eastern District of Virginia, in Richmond, Va. The company’s Canadian operations are also seeking protection under the Companies' Creditors Arrangement Act in Canada (“CCAA”).

The consumer electronics company says it will continue operating without interruption as management focuses on developing and executing a comprehensive corporate restructuring plan.

Circuit City recently announced that it was taking certain actions to address the company's financial condition and deteriorating liquidity position, including announcing it was closing 155 domestic segment stores. This week, the company also took action to realign its regional and district support structure commensurate with the smaller store base, which will include approximately 566 stores when the domestic segment store closings are completed. As a further cost-saving measure, the company reduced its corporate headquarters workforce by 700 positions, including corporate, regional and district support staff. The store closings and support workforce reductions will result in a combined domestic workforce and store base reduction of approximately 20 percent.

“We recently have taken intensive measures to overcome our deteriorating liquidity position,” says James Marcum, vice chairman and acting president and ceo. “The decision to restructure the business through a Chapter 11 filing should provide us with the opportunity to strengthen our balance sheet, create a more efficient expense structure and ultimately position the company to compete more effectively.”

Circuit City Stores operates 712 superstores and 9 outlet stores in the U.S. and 770 retail stores and dealer outlets in Canada.