Circuit City files for bankruptcy

[HURAKAN]

Circuit City files for bankruptcy
Mon Nov 10, 2008 9:19am EST

NEW YORK (Reuters) - Circuit City Stores Inc, the No. 2 U.S. consumer electronics retailer, filed for bankruptcy protection on Monday just a few weeks before the start of the key holiday shopping season, becoming the largest retailer to file under Chapter 11 this year.

Circuit City fell victim to tighter credit terms from vendors and a loss of market share to Best Buy Co, Wal-Mart Stores Inc and other rivals.

The retailer and 17 affiliates filed for Chapter 11 protection from creditors with the U.S. bankruptcy court in Richmond, Virginia, where it is based.

Circuit City filed one week after saying it would close 155 stores, or more than one-fifth of its retail base, and eliminate 17 percent of its U.S. workforce. It also said it was considering all options to restructure.

In a court filing on Monday, Chief Financial Officer Bruce Besanko said the retailer filed for Chapter 11 in order to continue its turnaround efforts.

"In large part, a Chapter 11 filing is due to three factors, all of which contributed to a liquidity crisis that prevented the company from completing its turnaround goals outside of formal proceedings: erosion of vendor confidence, decreased liquidity and a global economic crisis," Besanko said.

PINCHED SUPPLIERS

Circuit City had lost money in five of the last six quarters. In recent weeks, suppliers pinched by the global credit crunch have tightened terms, sometimes requiring up-front payments before shipping goods.

Larger rival Best Buy, which is based in Minneapolis, has said it might take over stores that distressed rivals close.

Yet a flood of discounted merchandise from liquidating Circuit City stores could hurt Best Buy during this holiday shopping season, said Jefferies & Co analyst Dan Binder.

"Longer term, you've got Best Buy, who's dominant in the sector, taking share. But in the short run it could feel the pain of the liquidation activity," Binder said.

"There's already soft demand out there and probably too much supply. This exacerbates the situation," he added.

According to the filing, Circuit City had $3.4 billion of assets and $2.32 billion of debt as of August 31, and more than 100,000 creditors.

The company has arranged a commitment for debtor-in-possession financing of $1.1 billion, which will allow it to continue to operate during the bankruptcy proceeding.

Among the company's largest unsecured creditors are Hewlett-Packard Co, Samsung Electronics Co and Sony Corp, the filing shows. The largest shareholders include HBK Master Fund LP and First Pacific Advisors LLC, according to the filing.

Shares of Circuit City last traded Friday at 25 cents, New York Stock Exchange data shows. They fell to 13 cents in premarket trading.

(Reporting by Jonathan Stempel and Martinne Geller; Editing by Steve Orlofsky and Brian Moss)

[lurkey]

This was a long time coming. .. Circuit City has been in trouble for awhile. They recently closed 155 stores.

http://consumerist.com/5081885/circuit- ... bankruptcy

BTW, be careful if you do go to the Circuit City liquidation sales, the "deals" aren't as great as made out to be.

[Category 5]

Had a bad experience at Circuit City and stopped going there, Best Buy is alot better.

[gtalum]

Both BB and CC charge ridiculous prices for what they sell. You're better off window shopping there and then finding the item online for much less.

[southerngale]

Perhaps they should put stuff on sale, like Best Buy, instead of offering rebates. For instance, why would I buy a computer from Circuit City that requires me to send off a gazillion rebates to get the "sale" price, when I can go over to Best Buy and just pay that same price up front, without having to hassle with a bunch of rebates?

I wouldn't.

Best Buy is doing great. Circuit City is in trouble. They should take note of what consumers don't like. I don't know anyone who likes to mess with a lot of rebates.

[fwbbreeze]

My brother owns and operates a small computer repair and sales store. He laughs at what these large chains charge for electronics, espically computers. Basically he tells his customers to go to BB or CC, find exactly what they are looking for, and come back to him so he can go to his distributors and find them the exact same computer for sometimes up to 40% less than the big stores. THis still allows him to make a profit and saves the customer a wad of cash.

I agree with gt, window shop then hit your online stores for much better deals!

[HURAKAN]

I have never had any problems with Circuit City. They usually have good deals. Nonetheless, my opinion is limited by the fact that I only shop there once or two every year. Not a constant buyer.

[george_r_1961]

This is not surprising. Best Buy is the place to go for electronics in my area. Compusa couldnt compete with them either and went out of business here early this year.

[somethingfunny]

The Circuit City here in Sherman is already set to close. It's too bad because they always let me go in there and use the Internet on their display computers or play games like Guitar Hero, Madden, or Burnout for hours without ever buying anything. This policy might have something to do with their going out of busines....but I'm sad to see it.

[lurkey]

http://consumerist.com/5082090/timeline ... ame-undone

[tropicana]

my cousin's husband used to work for Circuit City in Kendall, Florida... but over the past 5 years or so, he moved to Best Buy. Best move yet!

-justin-

[Category 5]

Both BB and CC charge ridiculous prices for what they sell. You're better off window shopping there and then finding the item online for much less.

Especially now, I'm saving 10-20% on Amazon over BB regularly.

[vbhoutex]

Circuit City is closing 2 stores in the Houston metro area and just opened one about a mile from my home.

[lurkey]

Circuit City get a new lease on life

[CajunMama]

I always liked circuit city. I buy from both cc and bb. I prefer cc's atmosphere because it's quieter and calmer feeling. Both have great websites too. I've probably ordered more online at cc and in person at bb.

[Stephanie]

I never liked the layout of CC - it was like a "room" for this type of electronics and another room for another. I like Best Buy because I want to be able to see the whole store in front of me and know where to go. Anyway, I did get a great deal at BB on my Compaq Presario this year and there were no rebates to have to submit.