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Rise and Fall of Circuit City Stores
Circuit City Stores, Inc. (former NYSE ticker symbol CC) was an American multinational consumer electronics corporation. It was founded in 1949 and pioneered the electronics superstore format in the 1970s. Circuit City liquidated its final American retail store in 2009, following a bankruptcy filing and subsequent failure to find a buyer. At the time of liquidation, Circuit City was the second largest U.S. electronics retailer, after Best Buy. There were 567 Circuit City Superstores nationwide, ranging in size from 15,000 to 45,000 square feet (1,400 to 4,200 m2), when the company announced total liquidation. The "Circuit City" brand was then bought by Systemax, Inc., which used the brand to sell electronics and media as an online retailer, CircuitCity.com, until late December 2012, when the website was merged with TigerDirect. Bankruptcy and liquidation
On November 4, 2008, Circuit City announced that it would close 155 stores and lay off 17% of its workforce by the end of the year as a result of continuing difficulties in remaining profitable. On November 7, 2008, Circuit City laid off between 500 and 800 corporate employees from its Richmond, Virginia headquarters. The approximately 1000 remaining corporate employees were consolidated into one building in an effort to further reduce costs and improve profitability. On November 10, 2008, Circuit City filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. At that time, Circuit City's stock prices traded well below $1 per share, and were removed from listing on the New York Stock Exchange. In bankruptcy court, Circuit City was approved to borrow $1.6 billion to finance operations while restructuring. Court filings revealed that the company had assets of $3.4 billion and debt of $2.32 billion, including a $119 million debt to Hewlett-Packard and a $116 million debt to Samsung Electronics. Chief executive James A. Marcum promised that the stores would stay open and the chain would not be liquidated. On November 18, 2008, it was announced that Ricardo Salinas Pliego, current owner of Mexican television broadcaster TV Azteca, had purchased 28 percent of Circuit City. On January 10, 2009, it was announced by a company spokesman that Circuit City needed a buyer by January 16, 2009 to keep from shutting its doors due to an approaching deadline set by the court and creditors. Although two unnamed parties were interested in buying out Circuit City, a bidder could not be found, so Circuit City, with bankruptcy court approval, converted its Chapter 11 bankruptcy to Chapter 7, and started airing "going out of business" commercials, as they started closing all of their stores. The Canadian operations, which were run under The Source by Circuit City banner, were not initially affected by the liquidation, but were later sold to Bell Canada. According to Circuit City's website, the company announced on January 16, 2009 that it intended to close all of its stores. Reportedly, over 30,000 employees lost their jobs in the liquidation, as well as 45% of Verizon's Circuit City sales force being laid off with the remainder resigning or transferring to other Verizon locations. The final day of operations for all Circuit City stores was March 8, 2009. Besides retail auto dealerships, Circuit City closed more retail locations in the U.S. than any other retail chain in 2009. Circuit City selected Great American Group LLC, Hudson Capital Partners LLC, SB Capital Group LLC, and Tiger Capital Group LLC to handle the liquidation of all stores nationwide. After the final date of operation for all Circuit City stores, the company's online store was replaced with a page that read as follows: Circuit City would like to thank the millions of customers who have shopped with us during the past 60 years. Unfortunately, we announced on January 16, 2009, that we are going out of business. |
Circuit City closes its doors for good
BY The Associated Press Sunday, March 8, 2009, 9:36 PM RICHMOND, Va. - What began 60 years ago as a humble television store in this sleepy Southern capital ended Sunday as Circuit City closed its doors for good - its 567 remaining U.S. stores to be left broom clean and vacant. For the last month and a half, a group of four liquidators have conducted going-out-of-business sales for what was the nation's second-largest consumer electronics retailer, selling its remaining $1.7 billion worth of inventory weeks sooner than expected. In its wake Richmond-based Circuit City Stores Inc. will leave more than 18 million square feet of vacant space in a faltering real estate market. And more than 34,000 employees, some who worked through the liquidation announced in January, will be jobless. Shareholders will likely get nothing and creditors may receive far less than what they are owed. Circuit City filed for Chapter 11 bankruptcy protection in November with hopes of emerging as a stronger company able to compete in the ever-expanding marketplace; shedding its $2.32 billion in debt and getting out of older real estate. Unable to work out a sale or secure new financing, the company will instead spend its remaining days tallying money from the sale of its assets, breaking or assigning its leases and paying off its growing list of creditors. Circuit City owes nearly $625 million to its 30 largest unsecured creditors - mostly vendors who supplied the DVDs, flat-screen TVs and headphones on Circuit City shelves. They must wait to be paid until secured creditors such as bank lenders are satisfied. A small staff will remain at the corporate office during the wind-down process, but Circuit City's bookkeeping may ultimately be reduced to a laptop computer running small business accounting software. Over the last few years, Circuit City, which at its height had more than 700 stores, faced heightened competition, pressure from vendors and waning consumer spending. Ultimately, the hobbled credit market and consumer worries proved insurmountable. The dismal environment also has claimed retailers including KB Toys and Mervyns. Circuit City, which posted losses in seven of its final eight quarters, had its brand value diminished in the 1990s as it lost significant traffic to rivals like Best Buy Co., which built bigger stores in better locations and achieved greater economies of scale. Wal-Mart Stores Inc. and others who have expanded their electronics offerings also wooed Circuit City customers. Around the country, stores once full of televisions, stereos, computers and other consumer electronics had little merchandise left on the last day of business, with many locations selling store fixtures like shelves and other odds and ends. Inside a store in Little Rock, Ark., a few tables sat in the middle of an empty showroom, with discarded wireless phones and other electronic wiring. A box nearby contained alarms, that once guarded the store's digital cameras and camcorders, being sold for 25 cents each. Families with toolboxes disassembled the store's racks and stands. Terry Garner, 60, of Little Rock, struggled to shove a rack into the back of his van. "That's all they had left," said Garner who had previously bought a keyboard and other items from the chain. Checking out the liquidation sale was a smart move for "yard-sale shoppers" like he and his wife. "We're going in there for bargains," he said. At a Circuit City store on Manhattan's Upper West Side, store employees spent time saying their last goodbyes. The store had already been fleeced of all its inventory, and a makeshift sign outside the store offered only fixtures. Shopping carts, store displays and even check-out stands were for sale, although few customers streamed into the two-story space. Store employees huddled together, sitting on a check-out counter, laughing and reminiscing. A store manager declined to comment about the retailer's last day in business. All but two small aisles and some scattered plastic bins overflowing with tangled cables and had been cleared out of a store in San Antonio. The other aisles were blocked with yellow caution tape, while signs warned "All Sales Are Final." The parking lot was busy, but many customers came of the store empty-handed. "Everything is picked over. They're going over wires and TV stands, the little stuff," said Roman Garcia, 30, carrying a bag crammed with videogames. He bought nine copies of an online multiplayer game called "Team Fortress." He picked up the copies for $1 apiece and planned to send them to other members of his online gaming group. Alan L. Wurtzel, son of company founder Samuel S. Wurtzel and himself a former chief executive of Circuit City, has previously said the company didn't take the threat from Best Buy seriously enough and at some points was too focused on short-term profit rather than long-term value. Still Circuit City took arduous steps in an attempt to turn around its struggling business. In 2008, it defused a proxy battle, opened its books to potential buyers like Blockbuster Inc., changed management, closed stores in some locations and tested smaller concept stores in others. It laid off about 3,400 store workers in 2007 and replaced them with lower-paid employees, a move analysts warned could hurt morale and drive away customers. Circuit City also had hoped to make up for its diminished product margins with its service and installation business called Firedog, which opened in 2006 - four years after Best Buy purchased the similar Geek Squad service. "I wish there was one kind of fatal blow that we could all pick out," said Stephen Baker, vice president of industry analysis at market researching firm, The NPD Group Inc. "Every time there was a crossroad ... in hindsight they almost always did the wrong thing." Baker pointed to many other missteps in management, among them: not declaring bankruptcy sooner, not getting into the music and movie business earlier, takeover bids in the mid-2000s, and exiting the appliance business in 2000. "When you make that many mistakes, eventually you end up at the edge of the cliff," he said. While the electronics retail giant as it has been known for years will be gone, the Circuit City name may still live on. Telecommunications company Bell Canada is buying a chain of 750 The Source by Circuit City electronics stores across Canada operated by the company's InterTAN subsidiary. And Hilco Merchant Resources LLC, a Northbrook, Ill.-based retail consulting and liquidation firm, said it hopes to buy the brand name and Web site. When asked for comment on the company's store being shuttered permanently, Circuit City offered only this comment from James A. Marcum, its vice chairman and acting president and chief executive: "I want to thank our associates for their hard work during this difficult time." |
Lessons From the Death of Circuit City
By Rachel Feintzeig 2012-10-25 Alan L. Wurtzel spent his adolescence putting antennas on roofs, delivering televisions and listening in on the Sunday night strategy sessions his father—the ambitious, optimistic founder of a Virginia electronics retailer—held in their home. Over the course of the next sixty years, Circuit City Stores Inc. would grow into a company with 700-plus stores and $12 billion-in-sales—and then quickly collapse into bankruptcy and liquidation. Wurtzel would go on to helm the company and then cut his ties with it only to eventually be drawn back in by the aftermath. “I wanted to understand what happened,” Wurtzel said. The former Circuit City chief executive spent years sifting through filings and interviewing scores of former employees, directors, suppliers and analysts in an effort to unravel how the concept that came to his dad in a barber shop devolved into a victim of the global downturn and shifting consumer shopping patterns. His research recently yielded “Good to Great to Gone: The 60 Year Rise and Fall of Circuit City.” The book, which went on sale on Tuesday, is a case study, he says, of a business that found its stride and then refused to speed up when the pace of the industry quickened. Circuit City wasn’t necessarily fated to collapse in 2009, Wurtzel said in an interview Wednesday, “had it woken up sooner.” Instead, management ushered in the new century with largely the same strategy Wurtzel had developed in 1980, focusing on services that customers didn’t need or want anymore. 2000 was technically the company’s best year, but even in the late 1990s, competitors like Best Buy BBY +1.70% Costco COST +1.70% and Kmart had already begun to chip away at the business’s foundation. “It wasn’t obvious in sales and earnings, but the rot had set in,” Wurtzel said. At that time, Wurtzel was a member of the company’s board, having stepped down as CEO in 1986. By 2000, he had also left the board and was completely uninvolved with the company. “I sold my stock because I didn’t believe in the future,” he said. Inside the business, management was aware of the retailer’s shortcomings, “but there was an arrogance,” Wurtzel said. He believes Circuit City’s decision makers weren’t scared enough by the shifting pressures in the industry nor nimble enough to quickly change course. Two former chief executives and a former attorney for Circuit City and its management couldn’t immediately be reached for comment Thursday in response to Wurtzel’s criticisms. Wurtzel believes that once management finally came up with a plan, it failed to execute it, deterred by pressure from Wall Street. The investments that would have moved Circuit City’s business forward also would have threatened its stock price, he said. “I don’t think you can turn around a failing company in the full glare of publicity,” he said. That observation led Wurtzel to a tangible recommendation for struggling businesses: Go private before executing a turnaround. But many of the lessons he learned from studying his family business are vaguer and read almost like maxims. He calls them “habits of mind,” and they include mantras like “be humble,” “run scared” and “curiosity sustained the cat.” “Don’t think you know all the answers, because once you get complacent, you’re in trouble,” he said. Wurtzel’s father, Sam Wurtzel, opened a television store known as Wards, the first location in the eventual Circuit City empire, in Richmond, Va., in 1950. The idea came to him when he was passing through the city, stopped for a haircut and heard the barber talking about the South’s first television station, which had just debuted there. “The day he opened the store, he thought it would be a billion-dollar company,” Alan Wurtzel said of his father. The business evolved over the years, shifting from smaller hi-fi stores, selling gadgets like tuners and speakers, to bigger footprints offering a wider variety of electronics. The company faced bankruptcy in the 1970s but prevailed, and a name change and billions in sales followed. When the most recent economic crisis struck, Circuit City headed for Chapter 11 and tried to downsize but ultimately failed to pull off a reorganization. Some 43,000 workers were left unemployed. Wurtzel said it was painful to see the company shut down. “I think in some ways it’s like losing a child,” he said, adding that he had expected to survive the business and “found it contrary to the natural order of things” to see it dissolve. Circuit City’s lifespan proves that businesses have to fight hard every day, Wurtzel said. “The world is always changing, and you can’t rely on your past accomplishments,” he said. |