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The Source by Circuit City stores to remain open

InterTan Canada was granted creditor protection from an Ontario court

The Source by Circuit City has not short circuited in Canada.

All 772 electronics stores and dealer outlets in Canada under the InterTan Canada Ltd. umbrella will remain open after the Barrie, Ont.-based company, which owns the license to operate The Source by Circuit City was granted creditor protection by the Ontario Superior Court of Justice under the Canada Companies’ Creditors Arrangement Act (CCAA). The court appointed Alvarez & Marsal to serve as its monitor.

All staff at these stores will also remain employed during this period. According to InterTan, it will be business as usual for close to 3,000 employees that they call associates. Employee pay and benefits will not be impacted. For customers, The Source by Circuit City stores will continue to honour all vendor programs, product returns or exchanges, warranties and gift cards.

InterTan is a wholly-owned subsidiary of the Richmond, Va.-based Circuit City Stores Inc. Its U.S. parent also filed for Chapter 11 bankruptcy protection and has negotiated a commitment for a US$ 1.1 billion debtor-inpossession (DIP) revolving credit facility to supplement its working capital and provide additional immediate liquidity while it works to reorganize the business.

Circuit City’s Chapter 11 filing has caused a termination of InterTAN’s credit facilities, which forced the company in CCAA.

Ron Cuthbertson, the president of InterTAN, said the company regrets the necessity of the CCAA action and will be working with suppliers, employees and creditors to produce a successful holiday selling season.

“The Source is a small-format specialty retailer with 772 stores across Canada, significant future growth potential and approximately $650 million of annual revenues. Our management is committed to working with our employees, dealers, joint-venture partners, vendors, landlords and other stakeholders to emerge from CCAA,” he said.

While the 772 stores will remain open, the company did not reveal the status of InterTan’s five technical service centres or its 350,000 square foot distribution centre.

Circuit City’s U.S. quarterly disclosure reported that Canadian operations recently delivered stable or improving performance. For the second quarter ended August 31, 2008, the Source in Canada had a profit of US$4.9 million, up 133 per cent from US$2.1 million a year earlier. Net sales were US$147.3 million, up 11.2 per cent from US$132.5 million business.

The Source by Circuit City operates differently in Canada than the big box Circuit City stores in the U.S. The Source stores are significantly smaller on average in terms of floor space, employ fewer staff and carry less inventory. They are also predominantly located in shopping malls.

This is not InterTan Canada’s first rough spell. The company, which operated under Radio Shack for 35 years in Canada, was forced to close 62 stores in early 2007 when its parent company Circuit City Stores declared them to be under performing.

Jim Babb, spokesperson for Circuit City, in a previous interview said while those closings were unfortunate it was not an exiting of the market for the company.

The plan back them was to still run 800 or so stores as part of its international segment down from approximately 950. Of the 62 store closings 45 were formerly Radio Shack, 14 are Battery Plus and three are THS stores.

InterTan was acquired in May of 2004, but Circuit City and a year later all Canadian Radio Shack stores were rebranded as The Source by Circuit City.

By being open, InterTan maybe banking on that nine out of 10 Canadians surveyed want electronics for Christmas.

A recent study conducted by Leger Marketing and sponsored by rival FutureShop found that Canadians are planning to spend an average of $381 on electronic gifts for others. Men plan to spend more on consumer electronics than women, $342 to $216.Notebooks or desktop computers are one of the more popular items according to Leger. About 19 per cent of those surveyed will be buying one. The most popular item is a flat-screen display. About 31 per cent of the Canadians surveyed are purchasing that product.