Retailer regroups after Chapter 11 filing
- December 1, 2008
For troubled electronics retailer Circuit City Stores Inc., a lot is riding on this year’s holiday season. The Richmond-based company, the country’s
second-largest electronics retailer, filed for Chapter 11 bankruptcy protection last month in a bid to shore up its liquidity so it can reorganize and get
through the crucial year-end shopping season.
Citing pressure from vendors, the company said in a statement that operating under Chapter 11 “will provide the company’s vendors with assurances that they
will be paid for merchandise the company receives post-filing so the company can be sufficiently stocked for the holiday selling season.”
Circuit City plans to keep its business running as usual with Web and call centers open. Meanwhile, acting CEO James A. Marcum said in the statement that the
bankruptcy 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.”
The company, which has suffered plunging sales, a loss of more than $5 billion in stock market value in two years, and increased competition from rival Best
Buy Co., already is in the process of closing 155 of its 700 domestic stores by Dec. 31. The move has cut 7,200 jobs or about 17 percent of its U.S. work
force. Some retail analysts wonder if even a robust holiday season — considered unlikely with consumers pinching pennies in response to the weak economy —
will save the struggling chain. (See story on company’s stock performance on page 103.)
However, Circuit City’s ability to secure $1.1 billion in loans from a group of banks to beef up its working capital was hailed as an achievement in the
current market. In its filing, the company reported $3.4 billion in assets and $2.3 billion in liabilities.