Marcum faced with Circuit City turnaround

RICHMOND, VA. —Circuit City hired retail veteran James Marcum as its new vice chairman to help a ramped up turnaround effort that will hit a vital stretch entering the fourth quarter.

Marcum, 49, is a member of the chain’s board of directors and has close ties to Mark Wattles, a shareholder who was the driving force behind Circuit City’s aborted merger with Blockbuster Entertainment and an advocate for management change at the struggling chain.

Marcum served as coo at Hollywood Entertainment from 2001 to 2003, a video rental chain Wattles founded and sold to Movie Gallery in 2005. Marcum joined Wattles once again in 2005 when he bought Ultimate Electronics out of bankruptcy and served two years as the retailer’s ceo.

While Marcum has been described as a “turnaround expert” by Circuit City, he seems to have a limited resume in that department, though he did help Ultimate Electronics emerge from bankruptcy and become a viable chain (it currently operates 32 stores in Colorado and other Western states).

Marcum, however, does bring experience to the job and gives Wattles ties to a senior executive who would seem to share his views on retail management. But as one analyst noted, Circuit City’s problems are probably too widespread to be solved by one executive.

“There are cases where one person can come in and turn a company around, but Circuit City’s problems are systemic and extend all the way down to the sales floor,” said Andy Hargreaves, an analyst with Pacific Crest Securities. “They have to make changes to Circuit City’s corporate culture and that’s far more difficult.”

Hargreaves and other analysts point to chief executive Phillip Schoonover’s March 2007 decision to lay off 3,400 of his most experienced sales people as a turning point for the chain. The move did help the company’s bottom line—since Circuit City replaced them with lower-paid employees—but had a bad effect on company morale.

Circuit City’s turnaround strategy puts an emphasis on online sales and its smaller-format “The City” stores, which will comprise nearly all of the 50 new openings initially planned for this fiscal year. But the retailer will have to improve on its year-to-date performance heading into the holiday sales season. In its most recent quarter, it reported a $164 million loss and an 11.3% decline in same-store sales.