In this Sept. 29, 2008 file photo, of the exterior of Circuit City
store in San Mateo, Calif. Circuit City Stores has filed for bankruptcy
Monday, Nov. 10, 2008, about a week after it said it would close 20
percent of its stores. (AP Photo/Paul Sakuma, file)
(Paul Sakuma)
Richmond-based Circuit City, the nation's second largest electronics
chain, filed for Chapter 11 bankruptcy protection this morning, one
week after announcing it would close one-fifth of its stores in a
nationwide effort to cut costs and conserve cash in an increasingly
grim retail climate.
With the holiday shopping season looming, Circuit City Stores Inc.
said it planned to stay open for business while it developed and
executed a "comprehensive corporate restructuring plan."
The bankruptcy filing was one of several developments today that
reflect the ongoing economic downturn. Federal officials said they were
expanding their effort
to save insurance giant AIG from financial ruin; DHL announced it would
discontinue its money-losing U.S. domestic services as of Jan. 30 to
focus on European and international business; and mortgage giant Fannie Mae said it lost $29 billion in the third quarter and was nearly out of cash.
Circuit City said it hoped the bankruptcy would allow it to keep its
stores stocked with merchandise in the crucial weeks before Christmas,
by allowing the company to assure vendors they would be paid. Circuit
City said it is asking the U.S. Bankruptcy Court for the Eastern
District of Virginia to make wage and salary payments and honor
returns, exchanges, gift cards and other customer programs.
The company pledged to streamline costs and create a more efficient
operation. It negotiated a commitment for a $1.1 billion
debtor-in-possession revolving credit facility to provide immediate
liquidity and supplement working capital.
"The decision to restructure the business through a Chapter 11
filing should provide us with the opportunity to strengthen our balance
sheet, create a more efficient expense structure and ultimately
position the company to compete more effectively," James A. Marcum,
vice chairman and acting president and chief executive officer, said in
a news release.
"Our stores remain fully operational, and our associates are focused on
consistent and successful execution this holiday season and beyond."
Circuit City has struggled in the face of competition from rival Best
Buy Co. and others. It lost $320 million last year, its worst
performance ever, and has not reported a quarterly profit since the
first quarter of last fiscal year.
Last Monday, Circuit City announced it would close 155 U.S. stores
and lay off nearly 20 percent of its workforce. The stores that will be
shuttered are currently selling deeply discounted merchandise at
liquidation sales.
Three stores each will close in Virginia and Maryland. The Virginia
stores are located on Chain Bridge Road in McLean, Davidson Place in
Manassas and Albermarle Square in Charlottesville; The Maryland stores
are on Baltimore Avenue in Beltsville, 32nd Avenue in Marlow Heights
and Pulaski Highway in Baltimore.
"We know there is never a good time for individuals to be impacted
by decisions like these, and we deeply regret the effect this has on
our associates," Marcum said.
The DHL announcement said the shipping and logistics giant would
slash U.S. operating costs by more than 80 percent, cutting 9,500
employees from a U.S. payroll of about 13,000. The company will close
all its U.S. ground hubs and reduce the number of stations it operates
from 412 to 103.
"When we looked for efficiencies in the U.S. Express market, we
decided to focus on what we do best as a company, and that's
international shipping," John Mullen, global chief executive officer of
the company, said in a statement. " . . . This is the right move for our U.S. Express operations given the current economic climate and for the long run."
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