Circuit City restructures, closes 155 stores
RICHMOND, Va. Circuit City has announced that due in part to its deteriorating liquidity position and the continued weak macroeconomic environment, it has decided to take certain restructuring actions immediately, including closing 155 domestic segment stores, reducing future store openings and aggressively renegotiating certain leases. The company also is considering all available options and alternatives to restructure its business.
"Since late September, unprecedented events have occurred in the financial and consumer markets causing macroeconomic trends to worsen sharply. The weakened environment has resulted in a slowdown of consumer spending, further impacting our business as well as the business of our vendors," stated James A. Marcum, vice chairman and acting president and ceo. "The combination of these trends 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."
The 155 stores marked for closure are underperforming or are no longer a strategic fit for the company. They are located in 55 U.S. media markets, of which Circuit City will exit 12 U.S. media markets. The company expects that impacted stores will not open on Tuesday, Nov. 4, and store closing sales will begin on Wednesday, Nov. 5, ending no later than the end of the calendar year. When results were viewed at the individual, comparable-store level, the closing stores, as compared to the stores remaining open, on average had lower net sales, a lower close rate and a lower gross profit margin rate. The stores also were unprofitable when marketing expenses were allocated to the individual store-level results.
Circuit City will continue to honor its customer commitments and serve its guests through 566 stores in 153 U.S. media markets, via its Web site at www.CircuitCity.com and via phone at 1-800-THE-CITY. During this transitional period, Circuit City is executing a plan to minimize disruption to the operations of stores that are remaining open. No international segment stores are closing as a result of the real estate plans announced today.
The company also has revised its store opening plans for the current fiscal year and will not open at least 10 locations that were previously expected to open. The company still expects to open up to two incremental stores during the remainder of fiscal 2009. As previously announced, other than existing commitments, management intends to suspend store openings beginning in fiscal 2010.
As a result of the store closures, Circuit City expects to reduce store operating, payroll and marketing expenses. The store closures will result in a reduction of approximately 17% of the domestic segment work force.
"We deeply regret the impact today's announcement will have on our associates, our guests and the communities where these stores are located," said Marcum. "We truly are grateful to each of our associates for their many contributions to the company. We are also grateful for the loyalty and support we have received from our guests in the impacted communities." concluded Marcum.