Circuit City suffocating in bad economy, applies for bankruptcy
When consumers get nervous and stop spending as much money, it’s good to be in an industry of necessities or a nimble business that can rapidly change its products and services to adapt. Circuit City has neither option up it’s sleeve and so it’s turning to the government, applying for chapter 11 bankruptcy.
Circuit City sells a variety of discretionary items which are some of the first purchases consumers cut, and they’re large, which means it takes a while to adapt to new market conditions. Combine that with our current nasty economy and the company is in nasty straits.
Best Buy is the only electronics company larger than Circuit City in the United States, and neither company is a new kid on the block. Circuit City has been in business for nearly 70 years and has seen much of the evolution of computers and the miniaturization of consumer electronics. But, “Circuit City fell victim to tighter credit terms from vendors, a draining cash position and decreased consumer spending amid a deepening economic crisis,” according to Reuters.
The announcement follows previous cuts at the company, all focused on nursing its cash reserves through to the holiday season. Right now company officials are hoping for new investments of cash to prepare inventories for black friday.
If Circuit City is able to purchase stock for black Friday, it expects to emerge from bankruptcy in the first half of 2009. Lots of companies are looking to the government for assistance right now though, so Circuit City will have to get in line.
Suppliers have made it difficult for Circuit City to obtain inventory because they also are feeling strain from the credit crunch. Often the beleaguered retailer has to pay up front to receive any product. Deep discounts at closing Circuit Cities could also affect Best Buy who will struggle to compete with drop dead pricing.
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November 10th, 2008
To those folks that lost their jobs at Circuit City…Time to hit the job boards!
http://www.linkedin.com (professional networking)
http://www.indeed.com (aggregated listings)
http://www.realmatch.com (matches jobs based on your skills)
Good luck!
November 11th, 2008
Circuit City has been in trouble for a long while. When they cut their senior sales staff in favor of keeping young inexperienced sales staff, you could see trouble coming. Their products sold are the same things sold at Best Buy, so why is CC in trouble and BB apparently not? Bed for me, we already lost our CompUSA’s, now losing our CC and Tweeter, BB is all I’ve got left above the Target/Walmart/Sears Costco/BJ’s levels.