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Circuit City Aims to Beat Black Friday

17 Nov, 2008 By: Erik Gruenwedel

Circuit City Stores strategically filed for bankruptcy protection earlier this month to get a jump on the competition heading into Black Friday and the holidays, according to a liquidator involved in the retail chain’s clearance sales.

With consumer confidence and spending falling, the Richmond, Va.-based No. 2 consumer electronics retailer Nov. 3 announced the closure of 155 stores nationwide and initiated liquidation of inventory the week before filing for financial reorganization.

Economic conditions have forced people to scrutinize purchases, and credit card companies have reduced the amount of credit they are extending to cardholders, said Richard Kaye, EVP, Hilco Organization, the Northbrook, Ill.-based holding company for Hilco Merchant Resources, which is conducting the store closures for Circuit City. 

“People are just generally more conservative,” Kaye said.

He said the fact that select Circuit City stores are being closed within the holiday season is likely a factor that has contributed to very positive store traffic.

“Had these locations been closed under these economic conditions but not proximate to the holidays, we might be talking a very different story,” Kaye said.

Hilco, together with Boston-based Gordon Brothers Retail Partners, are paying Circuit City 72% of the aggregate cost value of the merchandise — valued from $190 million to $220 million — at the shuttered stores, plus expenses, according to a court filing.

Hilco and Gordon Bros. collect 3.5% of the aggregate cost value of the merchandise as fees, in addition to 50% of any excess sales proceeds.

Kaye said consumers realize retail liquidation is a great opportunity to take advantage of discounts and while getting holiday shopping done.

“We haven’t seen any declination in the number of people coming into the stores,” he said. “What we’ve found so far is that the discounts being offered are attractive enough to get people to come in at just about the normal levels we would expect during a liquidation.”

The executive said Circuit City realized now would be the best time to get consumers to act with a Black Friday-type opportunity. He said Black Friday, in general, is only important to individual retailers in terms of making their numbers for the year.

“[It plays] no factor from our perspective beyond the fact that we are already in the holiday shopping season,” he said.

Kaye reiterated that Circuit City gift cards were being honored at shuttered stores provided they were purchased prior to the beginning of the liquidation date. Cards purchased after Nov. 5 are only valid at surviving Circuit City locations.

Merchandise purchased at shuttered locations can be returned for credit only at stores than are slated to remain operational, he said.

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