Circuit City to liquidate remaining U.S. stores

[Matt Young 0]

http://news.yahoo.com/s/ap/20090116/ap_on_...city_bankruptcy

 

Bankrupt Circuit City Stores Inc., unable to work out a sale of the company, said Friday it will go out of business — closing its 567 U.S. stores and cutting 30,000 jobs.

 

The nation's second-biggest consumer electronics retailer is the latest casualty of an unprecedented pullback in consumer spending that has driven other brands such as KB Toys, Mervyns LLC and Linens 'N Things into bankruptcy. Experts believe there will be more to come.

 

"This is the only possible path for our company," Circuit City's acting Chief Executive James A. Marcum said in a statement. "We are extremely disappointed by this outcome."

 

The company had been seeking a buyer or a deal to refinance its debt, but the hobbled credit market and consumer worries proved insurmountable. Negotiations for an acquisition went past midnight on Thursday, a Circuit City lawyer said in court.

 

Two buyers — Mexican billionaire Ricardo Salinas Pliego, who controls a chain of electronics stores in Latin America, and the Golden Gate Capital private equity firm — had been looking to buy the company in a shrunken form, with either 350 stores or as few as 180 stores. But the company couldn't secure the necessary financing or support from vendors.

 

Employees were being notified Friday that they would lose their jobs and, if a judge gives final approval to the liquidation, stores would begin the closing process as early as Saturday.

 

"Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders," Marcum said.

 

Shareholders are likely to receive nothing, as is typical in bankruptcy cases. Circuit City said in court papers it has appointed Great American Group LLC, Hudson Capital Partners LLC, SB Capital Group LLC and Tiger Capital Group LLC as liquidators. They provide for 70.5 percent return on merchandise.

 

It was unclear what would happen to the company's 765 retail stores and dealer outlets in Canada. Circuit City lawyer Gregg Galardi of Skadden, Arps, Slate, Meagher & Flom LLP told a judge there are still bids for the Canadian business.

 

"Very, very sad," said Alan L. Wurtzel, the son of company founder Samuel S. Wurtzel, and the chief executive from 1972 to 1986, board chairman from 1986 to 1994 and vice chairman until 2001. "I feel particularly badly for the people are employed or until recently were employed."

 

Wurtzel has previously said Circuit City didn't take the threat of rival Best Buy Co. seriously enough and, at some points, were too focused on making a profit in the short term instead of building long-term value.

 

Credit Suisse analyst Gary Balter told investors that Circuit City's demise will help Best Buy cement its position as the market leader.

 

"Losing Circuit (City) and what had previously been an $11 billion business, in addition to share gains from other smaller outlets, should help to partially offset weaker consumer spending as well as further secure Best Buy's position as the leader in the space," he said.

 

The liquidation of Circuit City follows the worst holiday shopping season in four decades. People have slashed their spending since the financial meltdown in September as they worry about their job security and declining retirement funds.

 

KB Toys filed for bankruptcy in December and is liquidating stores. Department store chains Goody's Family Clothing and Gottschalks Inc. both filed for bankruptcy this week — Goody's plans to liquidate, while Gottschalks hopes to reorganize. Industry experts expect more bad news in the coming months as spending likely will deteriorate further.

 

The Circuit City move will also hurt the nation's malls, which have suffered from the rise in vacancies as other chains have liquidated. But analysts say that the demise of Circuit City, whose stores range in size from 20,000 to 25,000 square feet, will hurt the fortunes of mall operators even more.

 

"It will bring to market a glut of big box spaces across the country," said John Bemis, head of Jones Lang LaSalle Inc.'s retail leasing team. "It will have one of the largest impacts on big box real estate across the country."

 

Circuit City filed for Chapter 11 in November as vendors started to restrict the flow of merchandise ahead of the busy holiday shopping season. It had been exploring its options since May, when it opened its books to Blockbuster Inc. The Dallas-based movie-rental chain made a takeover bid of more than $1 billion with plans to create a chain to sell electronic gadgets and rent movies and games. Blockbuster withdrew the bid in July.

 

Circuit City, which said it had $3.4 billion in assets and $2.32 billion in liabilities as of Aug. 31, said in its initial filings that it planned to emerge from court protection in the first half of this year.

 

Under court protection, it broke 150 leases at locations where it no longer operates stores and closed 155 stores in the U.S. in November and December. But it also got permission from U.S. Bankruptcy Judge Kevin Huennekens to liquidate if the company could not find a buyer.

 

___

 

AP Retail Writer Anne D'Innocenzio contributed to this report.

 

 

[Steviekick 0]

It sucks that all these people will be out of a job. I didn't necessarily like shopping their, but it would be good for the occasional DVD or CD sale.

[The Niggardly King 0]

Ohgod, I hope Jericholic hasn't ended

[Youth N Asia 0]

I always liked Circuit City over Best Buy, but every time I was there the store was empty, I'm surprised they lasted as long as they did

[Cheech Tremendous 0]

We need Jericholic82's feelings on this, stat.

[The Niggardly King 0]

Perhaps he should change his name to "Jobber" cuz that's what hell likely be doing if WWE every calls him up.

 

At least he has a job, I'm soon to be unemployed.

 

 

But on the bright side this is my 5,500th post woohoo.

 

He seems to be taking this alright

[CBright7831 0]

That'll teach em for not hiring me in 2007 when I turned in a application.

 

Bastards.

[YourKock'sReallyGreat 0]

That'll teach em for not hiring me in 2007 when I turned in a application.

 

Bastards.

 

Hahaha. I applied to the location that Jerichoholic worked at several years ago. With all due respect to Jericho, the location I applied at wasn't looking for people who were in College but people who were going for their GED's and straight out of the Bronx.

[EVIL~! alkeiper 0]

 

That turned out well.

[YourKock'sReallyGreat 0]

 

That turned out well.

 

 

$350 for a Divx/DVD Player. Those were the good old days 10 years ago.

[haws bah gawd 0]

 

That turned out well.

 

 

$350 for a Divx/DVD Player. Those were the good old days 10 years ago.

 

When was the last time a Divx movie was released at retail? I honestly don't remember, or just haven't noticed.

[EVIL~! alkeiper 0]

1999

[DrVenkman PhD 0]

I always liked Circuit City over Best Buy, but every time I was there the store was empty, I'm surprised they lasted as long as they did

 

I guess it depends what you were looking for. In Dearborn, there was a Best Buy and a Circuit City across the street from each other. I'm usually only looking for DVDs if I'm shopping in the States and wow, did that particular CC have an awful selection compared to BB.

 

The first time I saw a Circuit City commercial was in 1992 on KTLA (one of the "Superstations" offered to us Canadians). I really enjoyed the giant building flying down and plugging into the ground. Welcome to Circuit City, where circuits are state of the art! (I think they actually say "service is state of the art", but I like mine better).

[DrVenkman PhD 0]

[Burning Pirate Ship Sex 0]

We need Jericholic82's feelings on this, stat.

 

I can proudly report that I have obtained exclusive video footage of Jerichoholic immediately after being informed of his impending unemployment.

 

[Dobbs 3K 0]

I think a lot of industry analysts saw something like this coming several years ago when they started firing all of their good tenured sales people because they were "overpaid," many of whom just took jobs at competitors.

[Youth N Asia 0]

My Circuit City was within half a mile of our mall, Best Buy, and Target

[Prophet of Mike Zagurski 0]

My Circuit City was within half a mile of our mall, Best Buy, and Target

 

So was mine. It was easy to compare prices because of this.

[migoli 0]

I went into a Circuit City last night with a friend and all I seen was 10% video games sign. When if ever is the 70%+ mark downs coming?!

[Prophet of Mike Zagurski 0]

The stores are supposed to be around for another couple months or till they run out of stock. I'd wait a few weeks till there are some decent deals.

[Gary Floyd 0]

We need Jericholic82's feelings on this, stat.

 

I can proudly report that I have obtained exclusive video footage of Jerichoholic immediately after being informed of his impending unemployment.

 

Actually I think it went a little more on the lines of this

[YourKock'sReallyGreat 0]

The stores are supposed to be around for another couple months or till they run out of stock. I'd wait a few weeks till there are some decent deals.

 

 

Let the Buyer beware. Usually in this process the parent company marks the price above the msrp and than puts a sale tag on it. Sometimes you are going to be spending more than the msrp or regular price during the closeout sale.

[DrVenkman PhD 0]

My Circuit City was within half a mile of our mall, Best Buy, and Target

 

This sounds a lot like the Ford Road Circuit City in Dearborn.

[Youth N Asia 0]

Flint actually

[Dobbs 3K 0]

Yeah, frankly with the big ticket items I doubt they're going to significantly slash prices. They're going to milk every dime they can out of the stuff to cover their debts.