Circuit City Files for Bankruptcy After a Year of Falling Sales and Corporate Cutbacks
Nov 11th, 2008 | By Mike Caggeso | Category: Financial NewsCircuit City Stores Inc. (CC) has filed for Chapter 11 bankruptcy, a week after the struggling electronics retailer announced it would close 155 of its 566 U.S. stores by Dec. 31 and slash its workforce by 17%.
“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,” James A. Marcum, vice chairman and acting president and chief executive officer, said yesterday (Monday) in a statement.
In the past year and a half, Circuit City has created nothing but a collection of ugly headlines. The Richmond, VA-based Circuit City has $3.4 billion in assets and $2.32 billion in liabilities, including a $119 million debt to Hewlett-Packard Co. (HPQ) and a $116 million debt to Samsung Electronics Co., Bloomberg reported.
Most recently, the fledging electronics retailer announced it would close 155, or 20%, of its 566 U.S. stores by Dec. 31 and slash its domestic workforce in an effort to conserve cash and reverse six consecutive quarters of falling sales.
The company has already slashed retail management positions, eliminated jobs at its corporate offices and laid off 3,400 retail workers.
On March 28, it was ousted from the Standard & Poor’s 500 Index.
The following month, Blockbuster Inc. (BBI) made an unsolicited $1 billion acquisition bid for Circuit City, offering at least $6 a share. The idea was to create a “supermedia” retailer that might be more competitive against such rivals as Best Buy Co. Inc. (BBY). But that offered fizzled.
In May, the company put itself on the auction block, a day after Best Buy announced plans to open stores in Europe via a $2.1 billion, 50-50 joint venture with London-based Carphone Warehouse Group PLC.
In June, Circuit City suspended its 4 cent dividend. And in September, President and CEO President Philip Schoonover resigned on the spot.
Circuit City has lost more than $5 billion in stock-market value in the past two years, Bloomberg reported.
Circuit City Files for Bankruptcy After a Year of Falling Sales and Corporate Cutbacks
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