Circuit City files for bankruptcy

[Niels Bohr 72]

Mon Nov 10, 2008 9:19am EST NEW YORK (Reuters) - Circuit City Stores Inc, the No. 2 U.S. consumer electronics retailer, filed for bankruptcy protection on Monday just a few weeks before the start of the key holiday shopping season, becoming the largest retailer to file under Chapter 11 this year.

Circuit City fell victim to tighter credit terms from vendors and a loss of market share to Best Buy Co, Wal-Mart Stores Inc and other rivals.

The retailer and 17 affiliates filed for Chapter 11 protection from creditors with the U.S. bankruptcy court in Richmond, Virginia, where it is based.

Circuit City filed one week after saying it would close 155 stores, or more than one-fifth of its retail base, and eliminate 17 percent of its U.S. workforce. It also said it was considering all options to restructure.

In a court filing on Monday, Chief Financial Officer Bruce Besanko said the retailer filed for Chapter 11 in order to continue its turnaround efforts.

"In large part, a Chapter 11 filing is due to three factors, all of which contributed to a liquidity crisis that prevented the company from completing its turnaround goals outside of formal proceedings: erosion of vendor confidence, decreased liquidity and a global economic crisis," Besanko said.

PINCHED SUPPLIERS

Circuit City had lost money in five of the last six quarters. In recent weeks, suppliers pinched by the global credit crunch have tightened terms, sometimes requiring up-front payments before shipping goods.

Larger rival Best Buy, which is based in Minneapolis, has said it might take over stores that distressed rivals close.

Yet a flood of discounted merchandise from liquidating Circuit City stores could hurt Best Buy during this holiday shopping season, said Jefferies & Co analyst Dan Binder.

"Longer term, you've got Best Buy, who's dominant in the sector, taking share. But in the short run it could feel the pain of the liquidation activity," Binder said.

"There's already soft demand out there and probably too much supply. This exacerbates the situation," he added.

According to the filing, Circuit City had $3.4 billion of assets and $2.32 billion of debt as of August 31, and more than 100,000 creditors.

The company has arranged a commitment for debtor-in-possession financing of $1.1 billion, which will allow it to continue to operate during the bankruptcy proceeding.

Among the company's largest unsecured creditors are Hewlett-Packard Co, Samsung Electronics Co and Sony Corp, the filing shows. The largest shareholders include HBK Master Fund LP and First Pacific Advisors LLC, according to the filing.

Shares of Circuit City last traded Friday at 25 cents, New York Stock Exchange data shows. They fell to 13 cents in premarket trading.

(Reporting by Jonathan Stempel and Martinne Geller; Editing by Steve Orlofsky and Brian Moss)

[Mononoke28 137]

I like Best Buy better anyway. Let's just hope they don't file for bankruptcy.

Diana

[Trumplestiltskin 5,791]

Can't say I'm surprised - Circuit City was horribly overpriced and their product selection wasn't terribly good compared to Best Buy.

Best Buy is a bit of a rip too - especially for DVDs.

[alienlovechild 75]

Best Buy is a bit of a rip too - especially for DVDs.

It's your money but why do people buy DVDs? How many times can you watch the same movie?

[Empress of Groovy 373]

Well, at least now they'll stop pushing those rip-off extended warranties.

[Trumplestiltskin 5,791]

Best Buy is a bit of a rip too - especially for DVDs.

It's your money but why do people buy DVDs? How many times can you watch the same movie?

How many times can you read the same book or listen to the same CD?

[w¡n9Nµ7 §£@¥€r 123]

There are some movies I've watched hundreds of times, between my DVDs and reruns on cable. My Cousin Vinny and Rush Hour come to mind.

[alienlovechild 75]

Best Buy is a bit of a rip too - especially for DVDs.

It's your money but why do people buy DVDs? How many times can you watch the same movie?

How many times can you read the same book or listen to the same CD?

I don't know if I've ever read the same book twice. I can listen to the same CD again and again because I don't focus my attention on it like I would a movie. I like Netflix because I always see a new movie and never watch anything I've seen before. There's just too much out there to see the same thing again for me.

[spookyturtle 9,466]

I like Best Buy better anyway. Let's just hope they don't file for bankruptcy.

Diana

I agree. Circuit City sucks.

[iahmjpinoy 6]

Yet a flood of discounted merchandise from liquidating Circuit City stores could hurt Best Buy during this holiday shopping season, said Jefferies & Co analyst Dan Binder.

"Longer term, you've got Best Buy, who's dominant in the sector, taking share. But in the short run it could feel the pain of the liquidation activity," Binder said.

Umm.. I was actually in a Circuit City this weekend that was having a 'Close Out Sale', and the ####### n there was only marked down 15% and was still more expensive than what Costco/Fry's had for sale @ normal price at the moment..

[w¡n9Nµ7 §£@¥€r 123]

Yet a flood of discounted merchandise from liquidating Circuit City stores could hurt Best Buy during this holiday shopping season, said Jefferies & Co analyst Dan Binder.

"Longer term, you've got Best Buy, who's dominant in the sector, taking share. But in the short run it could feel the pain of the liquidation activity," Binder said.

Umm.. I was actually in a Circuit City this weekend that was having a 'Close Out Sale', and the ####### n there was only marked down 15% and was still more expensive than what Costco/Fry's had for sale @ normal price at the moment..

Yeah but Costco's electronic goods aren't humane/organic.

Edited November 10, 2008 by A.J.

[Trumplestiltskin 5,791]

The chain store sales blow when it comes to electronics - sometimes you can get something good (i.e. on Black Friday if you camp out there overnight), but mostly you get a modest discount that doesn't amount to a real bargain.

Pretty much everything is cheaper on amazon than it is in those stores.

[S and S 12]

I always prefered Best Buy anyway and they have been great about dealing with any repairs for my computer that come up.

Another company I really like that is going out of business completely is Linen n' Things. I was sad to see them go though I know their prices were a bit high. At the same time everything I bought there has stayed in good condition and looks better than anything I have gotten from the cheaper stores.

[payxibka 10,048]

I like Best Buy better anyway. Let's just hope they don't file for bankruptcy.

Diana

Bankruptcy does not automatically mean "Going out of Business".... Look at K-MART, UAL, NWA, DELTA, LNT, et al...

[one...two...tree 2,762]

Regardless of what people think of the chain, that's more Americans out of work. Not good news at all.