November 3, 2008 (IDG News Service) Circuit City Stores Inc. said today that it plans to close 155 of its consumer electronics stores in the U.S. in an effort to increase its cash reserves and in response to the ongoing economic downturn.
The Richmond, Va.-based retailer, which signed a $775 million deal to outsource most of its IT operations to IBM last year, also announced that it plans to reduce its future store openings and try to "aggressively" renegotiate some of its leases. In addition, the company said it "is considering all available options and alternatives to restructure its business."
James Marcum, Circuit City's vice chairman and acting president and CEO, said in a statement that the economic turmoil "has strained severely our working capital and liquidity, and so we are making a number of difficult, but necessary, decisions to address the company's financial situation as quickly as possible."
Circuit City posted a list of the stores that it plans to shut down on its Web site (download PDF). The company said that the affected stores will be closed for business on Tuesday and then reopen on Wednesday for liquidation sales, which are expected to be completed by year's end.
The store closings will reduce Circuit City's current roster of 721 U.S. stores by 21%, leaving the retailer with 566 outlets. None of its 49 stores in Canada are being closed as a result of the actions announced today.
Meanwhile, the planned openings of 10 new stores will be stopped, the company said. Circuit City still expects to open up to two stores during the remainder of its current fiscal year, which ends in February. After that, it said, store openings will be suspended except for cases in which the retailer has existing commitments that it can't back out of.
Circuit City, which said the credit crunch has made it difficult to purchase goods from suppliers, plans to reduce its U.S. workforce by 17% as a result of the store closures. The announcement of the cutbacks comes just two business days after Circuit City disclosed last Thursday that it had been notified by the New York Stock Exchange that it no longer met one of the NYSE's financial standards for listing stocks.
In April, Blockbuster Inc. offered to buy Circuit City for up to $1.33 billion in cash, subject to an evaluation of the retailer's books. After months of resistance, Circuit City finally opened its books to Blockbuster, which later pulled its offer, saying that the acquisition wasn't in its best interest.