By Calvin Palmer
Circuit City, the consumer electronics retailer, has filed for Chapter 11 bankruptcy and so becomes one of the first big names on Main Street to fall victim of the credit crisis and economic downturn.
That news makes my irritation with the Circuit City TV ad that played repeatedly during the Colts v Steelers game yesterday afternoon pale into insignificance. It is not just the Circuit City ad. I get so tired of seeing the same ads played four or five times within the space of a couple of hours.
Circuit City has long trailed behind Best Buy as a retailer of consumer electronics. I have never particularly found its stores inviting places to visit; the sales staff know little about the products they are selling. When I have to inform sales staff of the features of a particular model that I am interested in purchasing, it is usually the time when I decide to take my custom elsewhere.
Given my previous experience at Circuit City, it came as no surprise last week when the company announced the closure of 155 stores, laying off 1,300 employees or 17 percent of its workforce. Last Friday, it announced 700 jobs would go at the corporate headquarters in Richmond, Virginia.
In the filing to the US bankruptcy court in Richmond, Circuit City’s chief financial officer Bruce H. Besanko stated: “Without immediate relief, the company is concerned that it will not receive goods for Black Friday and the upcoming holiday season, which could cause irreparable harm to the company and its stakeholders.”
The company also announced that it had secured a $1.1 billion credit line, which will allow it to continue to operate.
Circuit City said in a statement: “The company plans to continue operating the business without interruption as management focuses on developing and executing a comprehensive corporate restructuring plan.”
Circuit City has $3.4 billion in assets and $2.3 billion in debts, as well as more than 100,000 creditors such as Hewlett-Packard, Samsung Electronics and Sony.
Its Canadian operations also will be seeking protection under the Canada’s Companies’ Creditors Arrangement Act.
The company operated 721 stores in 165 US markets on October 31. The Canadian operatin comprised 770 retail stores and dealer outlets on September 30.
[Based on reports by The New York Times and AFP news agency.]
1 Comment
November 10, 2008 at 4:21 pm
Remember when Circuit City was a favorite in “Good to Great” by Jim Collins? Remember when we thought being big gave you clout with customers and vendors to produce long-term returns (Michael Porter’s 5 Forces Model)? It’s time we recognize that the old approach to management doesn’t work in a rapidly shifting competitive world. There are winners in today’s market, but they follow a different approach. Read more at http://www.ThePhoenixPrinciple.com