Circuit City to Close 69 Stores8 Feb, 2007 By: Erik Gruenwedel
An improved holiday sales season apparently wasn't good enough for Circuit City Stores. The No. 2 consumer electronics retailer announced it will shutter seven superstores and one distribution center in the United States, in addition to 62 stores in Canada.
The Richmond Va.-based retailer operates 643 retail stores and superstores domestically and more than 800 retail stores and dealer outlets in Canada.
The closings, which are expected to cost Circuit City upwards of $105 million in fourth-quarter (ending Feb. 28) expenses, will be implemented Feb. 12, with affected store locations initiating clearance sales Feb. 14.
The move will affect more than 200 superstore employees, 70 support personnel associated with international operations and an undisclosed number of staffers at a distribution center in Louisville, Ky.
The company also announced that Doug Moore, EVP and chief merchandising officer, has left the company.
In the third quarter (ended Nov. 30), steep discounts by flat-panel TV manufacturers apparently caught Circuit City off guard, resulting in a loss of $16 million, compared to a profit of $10.1 million during the same period the year before.
“Because of the intensified gross margin pressures that we saw in the third quarter within the flat-panel television category, we launched efforts to accelerate the timing of planned initiatives to improve sales and gross margin, as well as improve the efficiency of our expense structure,” said Philip Schoonover, chairman, president and CEO of Circuit City.
Dan Wewer, analyst with Raymond James & Associates in Tampa Bay, Fla., lauded the closings, saying it was “critical” for all consumer electronics retailers to lower their cost structure given pressures on gross margins.
“Frankly, we had anticipated Circuit City would look to close all of its Canadian businesses given their poor financial performance,” Wewer said in a research note.