Bankrupt Circuit City Stores Inc., unable to work out a sale of the company, said Friday that it will go out of business - closing its 567 U.S. stores and cutting 30,000 jobs.
The nation's second-biggest consumer electronics retailer is the latest casualty of an unprecedented pullback in consumer spending that has driven other brands such as KB Toys, Mervyns, and Linens 'N Things into bankruptcy. Experts believe there will be more to come.
"This is the only possible path for our company," Circuit City acting chief executive James A. Marcum said in a statement. "We are extremely disappointed by this outcome."
The company had been seeking a buyer or a deal to refinance its debt, but the hobbled credit market and consumer worries proved insurmountable. Two buyers, Mexican billionaire Ricardo Salinas Pliego, who controls a chain of electronics stores in Latin America, and the Golden Gate Capital private equity firm, had been looking to buy the company in a shrunken form. But the company couldn't secure the necessary financing or support from vendors. Some employees were notified yesterday they would lose their jobs and certain stores would begin closeout sales today.
Sales declined at Circuit City, once the biggest U.S. electronics retailer, as it lost market share to rival Best Buy Co., Wal-Mart Stores Inc. and online retailers.
In November it filed for bankruptcy protection after suppliers cut off credit and demanded cash upfront for shipments. At the time, the company planned to exit court protection as a going concern.
"You can't ignore the economic backdrop," said David Schick, a retail analyst at Stifel Nicolaus & Co. in Baltimore. "Had Circuit run into all these problems and had to go Chapter 11 in any other year, they wouldn't have had this outcome."
Shareholders are likely to receive nothing, as is typical in bankruptcy cases. Circuit City said in court papers it has appointed Great American Group Llc, Hudson Capital Partners Llc, SB Capital Group Llc and Tiger Capital Group Llc as liquidators. They will pay a 70.5 percent return on merchandise.
This story was supplemented with a Bloomberg News story.
JOBS LOST
Companies continue to slash jobs as the recession intensifies. Nearly a dozen announced cuts this week. Announced layoffs:
Circuit City 30,000
Hertz 4,000
Pfizer 2,400
WellPoint (health insurance) 1,500
Advanced Micro Devices (chip maker) 1,100
Blue Cross Blue Shield 1,000
Saks Inc. 1,000
Cummins (engine maker) 800
ING Group (insurance) 750
Neiman Marcus 375
Xerok 275
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