Circuit City CEO Philip Schoonover Out23 Sep, 2008 By: Erik Gruenwedel
Beleaguered CEO Philip Schoonover has quit troubled consumer electronics retailer Circuit City, effective immediately.
James Marcum, who was named to the Richmond, Va.-based retailer’s board in June as part of a settlement deal with dissident shareholder Mark Wattles, was named acting president and CEO.
Wattles, co-founder and former CEO of Hollywood Video, is the largest independent Circuit City shareholder, with 6.5% of the company’s outstanding shares.
Marcum was named vice chairman of the board last month. The retail executive has a long history with Wattles, including a stint with his Denver-based Ultimate Electronics chain.
Schoonover, who also vacated the positions of president and chairman of the board that he assumed in 2006, had failed to reverse Circuit City’s ongoing financial slide despite repeated pronouncements that a turnaround was on the horizon.
He was paid more than $6.5 million in salary and stock in the past fiscal year.
The board elected Allen King as chairman. He has been a member of the board, including chairman of the compensation and personnel committee, since 2003.
"A change in leadership at the chief executive officer level is always a difficult decision,” King said.
The No.2 CE retailer (behind Best Buy) lost nearly $165 million in the most recent quarter — three times the loss ($55 million) it posted during the prior-year period. Circuit City has posted just one profitable quarter in the past fiscal year.
The retailer’s shares, which have steadily declined since last year, began freefalling after Blockbuster ended its acquisition attempt in July. On Aug. 27 shares hit their lowest valuation in 20 years.
Edward Woo, research analyst with Wedbush Morgan Securities in Los Angeles, said Marcum’s rise is a “clear sign” Wattles is getting his way.
“But only time will tell what happens to Circuit City,” Woo said.
Tom Arnold, professor of finance at the University of Richmond, said Wattles’ ascension to third-party control of Circuit City is remarkable considering the shareholder’s “outsider” status a year ago.
Arnold said Marcum inherits a host of problems, including Circuit City’s dwindling cash reserves — a significant concern, he said, with the current credit crunch and the slowing economy portending poor retail this holiday season.
“Marcum appears to have the management and the board behind him, which is support that Schoonover did not possess,” Arnold said.
He believes Circuit City will reverse its strategy of mimicking Best Buy and start to feature more unique products with higher margins and improved customer service.
“I also suspect Circuit City will be actively looking to be acquired because its cash position may be too limiting for a turnaround,” Arnold said.
Circuit City reports second-quarter results Sept. 29.