Analyst Says Circuit City Bankruptcy Likely in 2009

A research analyst at KeyBanc Capital Markets says Circuit City will likely file Chapter 11 bankruptcy as early as Q1 2009, the Associated Press reports.

"We believe a Circuit City bankruptcy has become a question of 'when' rather than 'if'," says Bradley Thomas.

Thomas says vendors could dictate when that filing happens, adding that if one vendor stops selling its products at Circuit City, others would follow.

Last week Bernard Sands, a credit reporting company, withdrew its recommendation for selling through Circuit City. The big-box retailer has also been working with outside advisers to try to improve its financial situation.

Circuit City reported a $239.2 million net loss for its fiscal second quarter. Thomas says it's also unlikely Circuit City could emerge from bankruptcy.

"We believe the likelihood that Circuit City can emerge from bankruptcy and its remaining number of stores post-bankruptcy are diminished by the weakening environment," he adds.

Thomas estimates Best Buy's earnings could rise 37 cents per share in 2010 if Circuit City closed 300 of its approximately 700 stores.