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Circuit City Files for Chapter 11 Bankruptcy
Company says filing will allow it to continue business as usual, paying salaries and benefits, honoring returns and gift cards.
Circuit City Stores Inc. has filed for Chapter 11 bankruptcy.
The No. 2 electronics retailer in the United States says it will continue operating business as usual “as management focuses on developing and executing a comprehensive corporate restructuring plan.”
The announcement came this morning, one week after it announced plans to close 155 stores, roughly 20 percent of its outlets.
Circuit City says, in conjunction with the filing, it's seeking customary authority from the Bankruptcy Court to continue operating its business and serving its customers in the ordinary course. This includes authority to:
The facility provides additional immediate liquidity and permits the company to pay vendors and other business partners for goods and services received after the filing, according to Circuit City.
The company says the protection of Chapter 11 will enable it to better build on its restructuring initiatives. "We recently have taken intensive measures to overcome our deteriorating liquidity position," says CEO James A. Marcum, who was recently brought in and touted as a "turnaround executive."
"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.
In the meantime, our stores remain fully operational, and our associates are focused on consistent and successful execution this holiday season and beyond.”
Many former Circuit City employees, however, didn’t quite make it through the holiday season. Between 500 and 800 employees were laid off last week in conjunction with the announcement of 155 store closings, according to a report in the Richmond Times-Dispatch, Circuit City’s hometown newspaper.
Many in the industry watch with interest to see how and if Circuit City survives the holiday season. Liquidating of merchandise can potentially mean that the retailer could lower prices to “predatory levels,” as Jim Ristow, executive director of buying group Home Entertainment Source, recently suggested.
The NPD Group, however, says usually a structured liquidation process doesn’t translate to great deals for consumers.
Ristow also recently suggested that a likely scenario for Circuit City has somebody buying it after a Chapter 11 filing and it emerging restructured with far less stores.
The No. 2 electronics retailer in the United States says it will continue operating business as usual “as management focuses on developing and executing a comprehensive corporate restructuring plan.”
The announcement came this morning, one week after it announced plans to close 155 stores, roughly 20 percent of its outlets.
Circuit City says, in conjunction with the filing, it's seeking customary authority from the Bankruptcy Court to continue operating its business and serving its customers in the ordinary course. This includes authority to:
- Make wage and salary payments
- Continue various benefits for employees
- Honor customer returns, exchanges and gift cards
The facility provides additional immediate liquidity and permits the company to pay vendors and other business partners for goods and services received after the filing, according to Circuit City.
The company says the protection of Chapter 11 will enable it to better build on its restructuring initiatives. "We recently have taken intensive measures to overcome our deteriorating liquidity position," says CEO James A. Marcum, who was recently brought in and touted as a "turnaround executive."
"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.
In the meantime, our stores remain fully operational, and our associates are focused on consistent and successful execution this holiday season and beyond.”
Many former Circuit City employees, however, didn’t quite make it through the holiday season. Between 500 and 800 employees were laid off last week in conjunction with the announcement of 155 store closings, according to a report in the Richmond Times-Dispatch, Circuit City’s hometown newspaper.
Many in the industry watch with interest to see how and if Circuit City survives the holiday season. Liquidating of merchandise can potentially mean that the retailer could lower prices to “predatory levels,” as Jim Ristow, executive director of buying group Home Entertainment Source, recently suggested.
The NPD Group, however, says usually a structured liquidation process doesn’t translate to great deals for consumers.
Ristow also recently suggested that a likely scenario for Circuit City has somebody buying it after a Chapter 11 filing and it emerging restructured with far less stores.
Circuit City's Difficult 2008
 | Circuit City to Liquidate Remaining U.S. Stores Four liquidators to sell merchandise in remaining 567 U.S. stores. More than 35,000 jobs will reportedly be lost. Circuit City Receives Approval from Bankruptcy Court Circuit City has received approval for its $1.1 billion debtor-in-possession (DIP) revolving credit facility a day after voluntarily filing for Chapter 11 bankruptcy. Circuit City Files for Chapter 11 Bankruptcy Company says filing will allow it to continue business as usual, paying salaries and benefits and honoring returns and gift cards. Report: Circuit City to Close 155 Stores Big-box retailer is exiting several markets and has hired a team of liquidators to clear out the affected stores Circuit City Reports Non-Compliance With NYSE NYSE to assign ".BC" indicator to Circuit City's symbol to indicate it's below continued listing standards. Is this Finally It For Circuit City? How you can take advantage of the possible failure of the big-box retailer. Circuit City CEO Philip Schoonover Resigns The embattled CE retailer says Schoonover's resignation is effective immediately. He will be replaced by James Marcum. Circuit City Appoints 'Turnaround Executive,' Hints at Sale Company says new vice chairman James A. Marcum is highly experienced at turning retailers around. |
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About the Author
Tom LeBlanc, Senior Writer/Technology Editor, CE Pro
Tom has been covering consumer electronics for six years. Before that, he wrote for the sports department of the Boston Herald. Migrating to magazines, he was a staff editor for a golf publication and an outdoor sports publication. Now, as senior writer/technology editor of CE Pro magazine since 2003, he dabbles in all departments and offers expertise in marketing. Follow him on Twitter @leblanctom.
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Sell low-mid end stuff long enough and you end up smelling funny. All dressed up with junk and nowhere to go. Lots of employees walking around doing nothing.
Lets take an example:
Computers. You can buy pre-packaged stuff all day long. Even peripherals. But guess what, no motherboards or CPUs. Think the computer crowd is gonna hang out there? Nope, they go to Fry’s who doesn’t really have lower prices but they do carry the MB, CPU and memory the geeks want so they all hang out there and buy the other peripherals while they’re there. Think their “firedog” know enough to build a computer. If not, they also don’t know how to sell one.