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Circuit City considering closing 150 stores and thousands of job cuts: reports

Store closures and layoffs could help company pay off its real-estate and lease costs

The Wall Street Journal today reported that consumer electronics retailer, Circuit City Stores Inc. (NASDAQ: CC), is considering shutting down at least 150 of its locations and cutting thousands of jobs to avoid having to file for bankruptcy protection.

According to the report, individuals familiar with the company’s plans said the possible store closings and layoffs could allow the big box retailer to help pay off its real-estate and lease costs on its abandoned locations, avoiding a bankruptcy protection filing.

Jim Babb, a spokesperson for Circuit City, could not confirm whether or not any of the company’s Canadian locations would be affected by possible store shutdowns and job cuts.

“We are not going to speculate on rumours and comment beyond our original statement,” Babb said. “The management team, board of directors and its strategic financial advisors are conducting a comprehensive review of all aspects of our business to determine the best methods of accelerating our turnaround and delivering substantially improved operating and financial performance. As previously announced, this includes assessing the productivity of our asset base and making decisions that are in the best long-term interest of Circuit City and our stakeholders.”

Last March, the company closed down 62 of its stores in Canada; 45 of which were previously known as Radio Shack, 14 were Battery Plus and the remaining three stores were THS. As quoted from a previous CDN story, Babb said, “These 62 stores in Canada were not profitable and from our analysis they were not going to be profitable and they are not in any one province or region.”

As part of its existing international market presence, the company still continued to operate its remaining 800 stores despite the Canadian store closures at this time. In 2005, as per a court order, the Canadian stores, which were known as Radio Shack, were rebranded to The Source by Circuit City.

Last month, the company announced its second quarter results ending August 31. Circuit City saw its net sales decrease for that quarter from US$2.6 billion down to US$2.39 billion, or a difference of 9.6 per cent year over year.

Bruce Besanko, executive vice-president and CFO of Circuit City said the company has continued to face challenges in its overall sales.

“We continue…to face challenges in our sales performance,” he said. “Our sales were below plan for the quarter, driven by a significant decline in traffic, which we believe reflects the worsened macroeconomic environment, competitive pressures and a weakened brand position. The progress we have made to date (in key areas) has not been sufficient to reverse our overall business results.”

A week prior to announcing its financial standings, Philip Schoonover, chairman, president and CEO, announced he was stepping down from his positions at the company. Also at this time, he said he would be resigning as a director of the company.

James Marcum has since been appointed to serve as the acting president and CEO for the company until a permanent replacement is found.