After 60 years Circuit City powers down
Mar. 8, 2009 03:35 PM
RICHMOND, Va. - What began 60 years ago as a humble television store in this sleepy Southern capital ended Sunday as Circuit City closed its doors for good - its 567 remaining U.S. stores to be left broom clean and vacant.
For the last month and a half, a group of four liquidators have conducted going-out-of-business sales for what was the nation's second-largest consumer electronics retailer, selling its remaining $1.7 billion worth of inventory weeks sooner than expected.
In its wake Richmond-based Circuit City Stores Inc. will leave more than 18 million square feet of vacant space in a faltering real estate market. And more than 34,000 employees, some who worked through the liquidation announced in January, will be jobless. Shareholders will likely get nothing and creditors may receive far less than what they are owed.
Circuit City filed for Chapter 11 bankruptcy protection in November with hopes of emerging as a stronger company able to compete in the ever-expanding marketplace; shedding its $2.32 billion in debt and getting out of older real estate.
Unable to work out a sale or secure new financing, the company will instead spend its remaining days tallying money from the sale of its assets, breaking or assigning its leases and paying off its growing list of creditors.
Circuit City owes nearly $625 million to its 30 largest unsecured creditors - mostly vendors who supplied the DVDs, flat-screen TVs and headphones on Circuit City shelves. They must wait to be paid until secured creditors such as bank lenders are satisfied.
A small staff will remain at the corporate office during the wind-down process, but Circuit City's bookkeeping may ultimately be reduced to a laptop computer running small business accounting software.
Over the last few years, Circuit City, which at its height had more than 700 stores, faced heightened competition, pressure from vendors and waning consumer spending. Ultimately, the hobbled credit market and consumer worries proved insurmountable. The dismal environment also has claimed retailers including KB Toys and Mervyns.
Circuit City, which posted losses in seven of its final eight quarters, had its brand value diminished in the 1990s as it lost significant traffic to rivals like Best Buy Co., which built bigger stores in better locations and achieved greater economies of scale. Wal-Mart Stores Inc. and others who have expanded their electronics offerings also wooed Circuit City customers.
Around the country, stores once full of televisions, stereos, computers and other consumer electronics had little merchandise left on the last day of business, with many locations selling store fixtures like shelves and other odds and ends.
Inside a store in Little Rock, Ark., a few tables sat in the middle of an empty showroom, with discarded wireless phones and other electronic wiring. A box nearby contained alarms, that once guarded the store's digital cameras and camcorders, being sold for 25 cents each.
Families with toolboxes disassembled the store's racks and stands. Terry Garner, 60, of Little Rock, struggled to shove a rack into the back of his van.
"That's all they had left," said Garner who had previously bought a keyboard and other items from the chain. Checking out the liquidation sale was a smart move for "yard-sale shoppers" like he and his wife.
"We're going in there for bargains," he said.
At a Circuit City store on Manhattan's Upper West Side, store employees spent time saying their last goodbyes. The store had already been fleeced of all its inventory, and a makeshift sign outside the store offered only fixtures. Shopping carts, store displays and even check-out stands were for sale, although few customers streamed into the two-story space.
Store employees huddled together, sitting on a check-out counter, laughing and reminiscing. A store manager declined to comment about the retailer's last day in business.
All but two small aisles and some scattered plastic bins overflowing with tangled cables and had been cleared out of a store in San Antonio. The other aisles were blocked with yellow caution tape, while signs warned "All Sales Are Final."
The parking lot was busy, but many customers came of the store empty-handed.
"Everything is picked over. They're going over wires and TV stands, the little stuff," said Roman Garcia, 30, carrying a bag crammed with videogames. He bought nine copies of an online multiplayer game called "Team Fortress." He picked up the copies for $1 apiece and planned to send them to other members of his online gaming group.
Alan L. Wurtzel, son of company founder Samuel S. Wurtzel and himself a former chief executive of Circuit City, has previously said the company didn't take the threat from Best Buy seriously enough and at some points was too focused on short-term profit rather than long-term value.
Still Circuit City took arduous steps in an attempt to turn around its struggling business.
In 2008, it defused a proxy battle, opened its books to potential buyers like Blockbuster Inc., changed management, closed stores in some locations and tested smaller concept stores in others. It laid off about 3,400 store workers in 2007 and replaced them with lower-paid employees, a move analysts warned could hurt morale and drive away customers.
Circuit City also had hoped to make up for its diminished product margins with its service and installation business called Firedog, which opened in 2006 - four years after Best Buy purchased the similar Geek Squad service.
"I wish there was one kind of fatal blow that we could all pick out," said Stephen Baker, vice president of industry analysis at market researching firm, The NPD Group Inc. "Every time there was a crossroad ... in hindsight they almost always did the wrong thing."
Baker pointed to many other missteps in management, among them: not declaring bankruptcy sooner, not getting into the music and movie business earlier, takeover bids in the mid-2000s, and exiting the appliance business in 2000.
"When you make that many mistakes, eventually you end up at the edge of the cliff," he said.
While the electronics retail giant as it has been known for years will be gone, the Circuit City name may still live on.
Telecommunications company Bell Canada is buying a chain of 750 The Source by Circuit City electronics stores across Canada operated by the company's InterTAN subsidiary. And Hilco Merchant Resources LLC, a Northbrook, Ill.-based retail consulting and liquidation firm, said it hopes to buy the brand name and Web site.
When asked for comment on the company's store being shuttered permanently, Circuit City offered only this comment from James A. Marcum, its vice chairman and acting president and chief executive: "I want to thank our associates for their hard work during this difficult time." After 60 years Circuit City powers down