posted 11-10-2008 09:51 AM                    

quote: Bloomberg News Article

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Nov. 10 (Bloomberg) -- Circuit City Stores Inc. filed for bankruptcy amid rising competition from Best Buy Co., Wal-Mart Stores Inc. and online electronics retailers.

The petition for Chapter 11 protection in U.S. Bankruptcy Court in Richmond, Virginia, listed $3.4 billion in assets and $2.32 billion in liabilities, driving the shares down 56 percent before the New York Stock Exchange halted trading. The company said it is entering court protection owing Hewlett-Packard Co. $119 million and Samsung Electronics Co. $116 million.

The Richmond-based company, founded in 1949 when Samuel Wurtzel opened the city's first retail television store, has lost more than $5 billion in stock-market value in two years. Circuit City plans to stay in business while it comes up with a plan to restructure.

``It's very incongruent for retailers to file bankruptcy before Christmas,'' Burt Flickinger, managing director of consultant Strategic Resource Group in New York, said in a Bloomberg Television interview. ``You're gong to see a record number of retailer bankruptcies and closings.''

Concerns among vendors that Circuit City wouldn't be able to pay for the merchandise it sells ``escalated considerably'' in the past week, the company said in the filing.

Web-Based Retailers

The chain, with 721 stores in the U.S. and 770 in Canada, has said competition hurt sales, especially at older locations in lower-income neighborhoods. Amazon.com Inc. and other Web-based retailers of computers, televisions and music also have lured customers away.

Circuit City fell 14 cents to 11 cents at 9:30 a.m. before the start of trading on the New York Stock Exchange. The NYSE halted buying and selling of the shares after the stock's early plunge.

On Nov. 3, the company said it would close a fifth of its U.S. stores and renegotiate leases on some locations to conserve cash. The closings will leave it with about 566 U.S. stores and trim about 20 percent of the 43,000-strong workforce. Circuit City also said today it cut 700 jobs in its regional and district store support department.

Circuit City said it owes about $650 million to suppliers, with electronics manufacturers Sony Corp., Zenith Corp., Toshiba Corp., Garmin Ltd. and Nikon Inc. among the creditors.

Circuit City tried to sell itself in May after Blockbuster Inc. made a preliminary offer that was later withdrawn. The retailer fired higher-paid workers and opened smaller stores to cut costs. Until the shift, the company's strategy had been to sell in locations as large as 44,000 square feet (4,090 square meters), which it calls ``superstores.''

Bankruptcy Financing

Circuit City said it obtained $1.1 billion in bankruptcy financing, which replaces a $1.3 billion line of credit.

The second-biggest U.S. electronics retailer hired FTI Consulting Inc. for restructuring advice and replaced its chief executive officer Philip Schoonover in September with Director James Marcum, who led two other retailers through bankruptcies. Marcum, an associate of activist investor Mark Wattles, was named interim CEO.

On Sept. 29, Circuit City reported a loss of $239.2 million that was more than triple from a year earlier after sales fell for the sixth straight quarter.

Circuit City's rivals gained market share by offering Apple Inc. and Dell Inc. computers. Larger Best Buy and discount retailer Wal-Mart lowered prices on flat-panel televisions to lure U.S. customers, who are limiting spending because of higher food costs, further job losses and declining home values.

The global financial crisis is making it harder for the chain to stock its shelves and for consumers to finance purchases.

The company took on more debt this year, increasing a $500 million revolving credit agreement to $1.3 billion in January, according to its most recent quarterly filing with the U.S. Securities and Exchange Commission. As of May 31, Circuit City said it still had $963 million available to borrow.

The case is In Re Circuit City Stores Inc., 08-35653, U.S. Bankruptcy Court for the Eastern District of Virginia (Richmond).

To contact the reporters on this story: Tiffany Kary in New York bankruptcy court at tkary@bloomberg.net; Mark Clothier in Atlanta at mclothier@bloomberg.net.
Last Updated: November 10, 2008 09:59 EST

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posted 11-10-2008 03:00 PM                       

quote: Randy Stankey

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Employees of stores like that are required to push the warranties and if their sales averages fall below minimum they can be "counseled" or lose their next opportunity for a pay raise. If their averages fall below the minimum for more than three months in a row they can be canned.

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posted 11-10-2008 09:22 PM                       

quote: Mike Heenan

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by then all you have left are the compressed air cans

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That'll bring all the huffers out of the woodwork.

posted 11-11-2008 07:02 PM                       

quote: Bobby Henderson

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very real possibility General Motors could go under.

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