UPDATE 2-Circuit City closing 155 stores, seeking options
(Adds details on store closures, stock price)
NEW YORK Nov 3 (Reuters) - Circuit City Stores Inc CC.N is closing 155 stores and considering all options to restructure its business as it struggles with a deteriorating liquidity position and tighter credit conditions from vendors.
The consumer electronics chain said on Monday it would cut 17 percent of its domestic workforce due to the store closings, but it declined to specify the number of employees affected.
Circuit City shares, which now trade for less than $1, rose 50 percent in early activity. Best Buy Co (BBY.N), which has said it could view store closures by rivals as an expansion opportunity, rose 7 percent.
Circuit City said that amid the recent financial markets crisis, its vendors have tightened terms and in some cases are now requiring the retailer to pay for inventory before they will make shipments.
"While management is working diligently to secure the support of its vendors and believes it has maintained good relationships with these important partners, the current mix of terms and credit availability is becoming unmanageable for the company," it said in a statement.
Analysts have said for more than a month that Circuit City, already losing share to Best Buy and discount retailer Wal-Mart Stores Inc (WMT.N), was particularly vulnerable if suppliers cut off support.
"At this point, we believe that a bankruptcy filing for CC (Circuit City) is largely unavoidable," Colin McGranahan, an analyst at Sanford C. Bernstein, said in a note on Monday.
"While CC actions should help to improve cash flow by removing the most underperforming stores in CCs portfolio, we expect the remaining stores to be under continued pressures," he said.
EXITING 12 MARKETS
With the store closures, Circuit City is leaving 12 of its U.S. markets, including Phoenix and Kansas City, Kansas. It is closing most of its stores in Atlanta and Cleveland, and will now operate 566 U.S. stores. Details on the store closings were posted on the company's website here
It said stores slated for closure would not open on Nov. 4, and closing sales would begin on Nov. 5. According to its website, the company had nearly 46,000 employees at the end of February.
U.S. retailers are heading into the bleakest holiday sales period in years as a housing slump, credit crisis and job losses force consumers to rein in spending.
Circuit City has been trying to rebuild profitability and restore investor confidence over the past year in the face of intense competition from Best Buy, which has been gaining market share in key electronics categories.
At the end of September, Circuit City posted a wider quarterly loss and withdrew its financial outlook as it reviewed its business ahead of the holiday shopping season.
The company, whose chairman and chief executive stepped down in September, said at the time that it could close stores as part of a turnaround plan and would suspend store openings during the 2010 fiscal year.
Circuit City said on Monday that it has revised store plans for the current fiscal year and will not open at least 10 locations that were previously expected to be opened.
It is trying to renegotiate certain leases to either lower its rent or exit a lease if its rent cannot be reduced.
Rival Best Buy has signaled its intention to snap up stores closed by distressed rivals.
"If store fronts close, a big number, you can bet that we will jump in and connect with those customers ... and take advantage," Best Buy President and Chief Operating Officer Brian Dunn told reporters at company headquarters last week.
"If there's a big opportunity, we're going to absolutely go after it."
Circuit City shares rose 13 cents to 39 cents. Last week, Circuit City was notified by the New York Stock Exchange that its shares were subject to delisting because its average closing price was less than $1 per share for a 30-day trading period. (Reporting by Nicole Maestri; Editing by Lisa Von Ahn and Maureen Bavdek)
- Ukraine accuses Russia of "undisguised aggression" as rebels advance |
- Disruptive Hong Kong protests loom after China rules out democracy |
- Syrian army, rebels fight on Golan where peacekeepers held |
- NATO to create new 'spearhead' force to respond to crises
- Investors look past Ukraine, focus on ECB