Circuit City cuts deeper; 800 let go at HQ, stores

RICHMOND, VA. —Circuit City is eliminating another 800 jobs with layoffs at its corporate offices and in stores. The new cuts come three months after the retailer eliminated more than 3,000 jobs, representing 10% of its in-store work force.

The company plans to eliminate 200 jobs at its corporate offices and approximately 600 store managers at its 654 stores. The store-level layoffs are part of a re-alignment that is going to assign managers to stores based on sales volume. The new moves are part of a $110 million cost-savings plan announced earlier this year and follows a first quarter in which Circuit City plans to announce a loss of up to $90 million.

While there’s no doubt Circuit City has to make up for its losses somewhere, analyst George Whalin believes job cuts are not the best way to save money.

“You can’t downsize your way to success,” said Whalin, president of Retail Management Consultants in San Marcos, Calif. “Having fewer people on the store floor is going to hurt customer service, especially when their main competitor [Best Buy] has people all over the place.”

The job cuts come less than three months after Circuit City announced it was eliminating 3,400 of its highest-paid workers and replacing them with lower-paid employees. The layoffs affected workers that the company believed had salaries “well above the market-based salary range for their role” and accounted for 8.5% of the retailer’s in-store work force.

“We have and continue to pay competitive wages in stores across the country but we have to control costs,” said Circuit City spokesman Jim Babb at the time. In early March, the retailer announced the closing of 69 stores and a distribution center in the United States and Canada following a fourth quarter in which same-store sales fell 0.5%.

Despite its problems, Circuit City is building up other areas of its business. It’s expanding its firedog tech repair service launched last year and plans to expand its 2,500-employee work force by more than 50% by February 2008. And it plans to open up to 65 stores in its current fiscal year and up to 100 per year starting in fiscal 2009.