Circuit City CEO resigns amid more looming bad news
Presaging dismal second quarter results for next Monday, Circuit City said today that its chairman, president, and CEO Philip J. Schoonover was stepping down, to be replaced by a retail turnaround artist named to the board in June.
James A. Marcum, who has served as vice chairman since August 18, has now been appointed to serve as acting president and chief executive officer.
Marcum has more than 20 years of experience in specialty retail, ranging from operating partner and operating executive of Tri-Artisan Capital Partners, LLC, a merchant banking firm; to Ultimate Electronics, Inc., a consumer electronics retailer specializing in home and car entertainment; and Hollywood Entertainment Corporation, a video home entertainment specialty retailer. He was reportedly named to the board this summer in an effort to prevent another investor, with a 6.5% stake in the company, from waging a proxy battle for control.
The concerns of that investor, and probably others, were cooled when Marcum called for Schoonover's ouster, according to Reuters reports this afternoon.
Allen B. King, who comes from the tobacco industry, was elected chairman of the board. King has been a member of Circuit City's board of directors since 2003 and its independent lead director since June 2008.
The retailer also reminded everyone that its next quarterly results would be released on Monday, and that they were expected to be slightly better than previously announced - meaning the company might lose less than the $170 million to $185 million it had previously stated. A year ago, its loss was $128 million for the quarter.
In the first quarter, the company lost $164.8 million. At that time, Schoonover said, "The board of directors is leading a process to explore strategic alternatives to enhance shareholder value," suggesting that the company was putting itself up for sale, though a potential merger with Blockbuster in July fell through.
At its first quarter announcements, Circuit City also said it had "cash, cash equivalents and short-term investments of $92.2 million, compared with $364.1 million at May 31, 2007" -- a $271.9 million decline, which the company said was due to "purchases of property and equipment and cash used in operations." At the same time, the company had $72.6 million in long-term debt, "primarily related to capital leases," and $55.0 million in short-term debt under the asset-based credit facility.
Circuit City had earned a profit during its fiscal fourth quarter, but it was barely over half a percent that of Best Buy -- $4.85 million, compared to $737 million. Circuit City also closed 27 stores during fiscal 2008, but hoped it would recoup losses with factors such as the Olympics and digital television conversion...which, presumably, did not happen.
Schoonover had been named Worst CEO of 2008 by The Wall Street Journal after laying off 3,400 of its highest-paid -- but most experienced -- sales people, which was cited as a major contributor to its 80% stock decline over the course of 52 weeks. Since then, the stock has steadily declined, closing at $1.70 today.
Remember these numbers: "At August 31, the domestic segment operated 705 Superstores and 9 outlet stores in 158 U.S. media markets. At August 31, the international segment operated through 772 retail stores and dealer outlets in Canada." Want to bet they're going to change?