Circuit City confirms massive store closings, layoffs
Today, Circuit City confirmed earlier reports that it will be closing 155 stores as a cost-cutting measure, and eliminating 17% of its workforce, or roughly 7,800 jobs.
Following a quarter that showed the company worked at a $162.7 million loss, reports arose that Circuit City was contemplating store closures as a cost-cutting measure.
Today, the electronics retailer announced as a part of ongoing cost reduction initiatives that it is closing 155 stores and reducing new store openings. Further, the company says it is "considering all options and alternatives to restructure its business."
Bankruptcy is one of the more probable options. On October 24, the company was placed on a six-month warning of delisting from the New York Stock Exchange if the company cannot bring its stock to a value over $1.00 for more than 30 days in a row. Stock actually shot up in value briefly today, and settled at around 38% higher than yesterday's close. (Thanks to Kristopher for the correction --ed.)
"We deeply regret the impact today's announcement will have on our associates, our guests and the communities where these stores are located. We truly are grateful to each of our associates for their many contributions to the company." said acting president as of September James Marcum.
Marcum is holding the position of former Chairman, President, and CEO, Phillip J. Schoonover, who announced his resignation prior to the second quarter fiscal 2009 announcements that the retailer was drastically losing capital.
The company blames "unfavorable macroeconomic conditions and [its] deteriorating liquidity position," for the continued decline. Circuit City has been suffering for much of the decade, but many consider the company's fatal misstep the March 2007 dismissal of 3,400 of its highest-paid hourly employees to reduce operating expenses.
But this store closure calls for the elimination of more than double that number. According to the company, there were 45,885 employees as of February 29, 2008. Seventeen percent of that total amounts to 7,800 employees. (.pdf list of closing stores.)
The attempt this year for Blockbuster to buy Circuit City dissolved as Blockbuster's chairman and CEO called the acquisition "not in the best interest of Blockbuster's shareholders." However, Circuit City today said it's in negotiations with "lenders and other third parties regarding various financing alternatives," signifying the potential for another such buyout offer.