Circuit City Shuts 155 Stores - The End is Near

Circuit City is shutting down 155 of its wost-performing stores and will, as a concurrent result, lay off around 7200 employees or 17 percent of its total workforce. The company is trying desperately to restructure its corporate structure, though at best it seems more like a controlled shut-down as the corporate machine attempts to salvage the company from an all-but collapsed stock market position.

Shutting down 155 stores represents just over 20 percent of the total number of stores the company has in the country (leaving just 566). Simultaneously, many manufacturers (the smart ones) are taking a defensive posture and changing their payment policies. This includes demanding cash payments for inventory in order to protect their stock from becoming a liability in the event of a (now foreseeable) bankruptcy call (and some are finding it hard to imagine how Circuit City can possibly avoid Tweeter's fate.) The company's stock went from $7.42/share a year ago to its present $0.30. The NYSE (New York Stock Exchange) voted October 24th to delist Circuit City stock if its price doesn't rise above $1 within six months. The likelihood of that happening seems very unlikely at this point.

The recent store closings come after almost two years of consistent losses for Circuit City as it has been consistently upstaged by Best Buy Co. Inc. and other big box stores like Wal-Mart, SAMs Club and Costco, which have been making inroads in selling consumer electronics. Over a year ago, Circuit City made the curious decision to lay off its more experienced and commission-based sales staff in favor of lower paid employees. Shortly thereafter a barrage of negative press surrounded the company and hasn't let up since. It's not all press, however, the company has made some very questionable decisions:

• Laying off 3500 sales staff
• Allowing exchanges of HD DVD players
• Shrinking its Firedog A/V installation services
• Creating store-within-store concepts
  

While we kind of liked the last idea, it was far too late in its implementation - well after the store had already been branded as being "questionable" by the media and consumers. Somewhere, there is a grad school for marketing and PR who will be studying this company for some time to analyze its demise and the exact causes which contributed to its slow-motion fall.

The 155 store closings being announced will begin as early as Wednesday, with the last store closing to be completed by the end of this year. This is a rough time to close stores and heading into the most active time of the year for retailers shows just how badly Circuit City is doing in this current economic climate.