Richmond, Va. An activist investor on Wednesday said Circuit City Stores Inc. should replace its chief executive and make other changes to help "unlock hundreds of millions of value."
Wattles Capital Management, led by Mark J. Wattles, which owns a 6.5% stake in the company, said in a letter to the board of directors that turnaround efforts under CEO Philip Schoonover were not working and that he should be replaced.
"There is the potential to unlock hundreds of millions of value in the near term and billions of value in the long term for Circuit City stockholders," Wattles wrote. "However, we have serious concerns with the company's current business strategy and operating performance."
In response to the Wattles proposal, Circuit City said in a statement, "The board has received the letter and will respond in due course."
The company reported a $207 million loss in its fiscal third quarter, and anticipates a "modest loss" in the fourth quarter, the period that includes the bulk of the crucial holiday-shopping season.
Wattles, founder of the Hollywood Entertainment video-rental chain, wants to nominate five members for Circuit City's 12-member board and oust all the current directors.
In the letter, Wattles suggested the company hire an investment bank to evaluate any possibility for a takeover offer and said the company's turnaround plan has been "disastrous."
He also urged the board not to "summarily dismiss any legitimate, third-party interest in acquiring or merging with the company," as it had done twice in the last five years.
The proposals, if accepted, would be aired during Circuit City's annual meeting in June.