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TRC Blog

January 16 , 2009

Circuit City to close all its stores

Friday, January 16, 2009

 

By MARIA HALKIAS / The Dallas Morning News
mhalkias@dallasnews.com

 

Today's brutal economy has swallowed another household retail name.

Sixty-year-old Circuit City Stores Inc. starts liquidating today, leaving 34,000 employees without jobs and adding 567 vacant buildings to a growing list of empty retail storefronts.

Richmond, Va.-based Circuit City said Friday that it expects all stores to be closed by the end of March, including 15 in Dallas-Fort Worth.

A bankruptcy court approved Circuit City's liquidation Friday after the company couldn't find a buyer. The court approved the sale to liquidators Great American Group LLC, Hudson Capital Partners LLC, SB Capital Group LLC and Tiger Capital Group LLC.

Circuit City's sales peaked in 2006 at $12.4 billion.

The No. 2 spot used to be a safe one in retailing, but Circuit City, Linens 'n Things and KB Toys have proved otherwise over the past year.

The retailer's demise puts $6 billion to $9 billion in business up for grabs this year, said Stephen Baker, vice president of industry analysis for market research and industry tracking company NPD. "That's a lot of PCs and iPods for others to get."

Best Buy Co., the largest U.S. consumer electronics chain, may feel some pain from such a huge liquidation sale, but it is a long-term winner, analysts said. So are regional chains such as Beaumont-based Conn's, which posted strong holiday results amid a sea of weakness, and California-based Fry's. Fort Worth-based RadioShack is also likely to benefit, analysts said.

A year ago, Circuit City would have been able to reorganize, but consumer electronics companies face a double-whammy: the recession and a market category too price-driven today, Baker said. "All the product cycles are on a decline now. People have two or three of everything and are driven by price."

In addition, growing competition online from Amazon.com and others and from bigger consumer electronics departments at Wal-Mart, Target, Sam's and Costco has made the environment even tougher.

"Wal-Mart has been squarely focused on electronics, and that puts pressure on the specialty stores like Circuit City," said Alan P. Shor, president of Dallas-based The Retail Connection L.P. "Best Buy is a very good operator. Then the other big boxes –Target, Sam's and Costco – put the death nail into Circuit City, which wasn't the best operator."

 

Management blamed

 

Consumer electronics retailers need to radically change the store experience, said Gilbert Fiorentino, chief executive officer of the technology products group at Systemax, parent company of CompUSA and TigerDirect. The company acquired 16 CompUSA stores from the defunct Dallas-based chain when it was liquidating a year ago, and Systemax operates one CompUSA store in Plano.

"Circuit City was just chasing Best Buy for a long time, and from the customer's point of view, they were homogeneous. If Best Buy can make money and Circuit City couldn't, the difference was management," Fiorentino said.

In the last few years, Tweeter and Ultimate Electronics have also closed stores.

Shoppers interviewed Friday said there was room in the market for Circuit City.

"I understand how competition got Ultimate and Tweeter, but this one I don't get," said Jerry Bland of Dallas, who had just purchased a 46-inch Sony TV at Circuit City. "I'm baffled. There are fewer places where you can talk to someone who can help you with things like the differences in a TV's picture quality."

John Blessing of Plano stopped at the Plano Circuit City on his lunch hour to buy a DVD player. He said he was sad to hear about Circuit City. "I come here instead of Best Buy because I like the service better."

As part of its initial effort to reorganize, Circuit City closed 155 stores during the holiday shopping season, including five in the Dallas area. Among them was a store in Mansfield that had only been open since Sept. 25.

Circuit City had been exploring strategic alternatives since May, when Dallas-based Blockbuster Inc. made a takeover bid of more than $1 billion with plans to create a home entertainment chain.

Real estate experts estimate that it will take years to fill the spaces left by the Circuit City and Linens 'n Things stores alone.

 

Good real estate

 

Most of the Circuit City stores in North Texas are in good locations, said Bob Young, Weitzman Group's managing director. "We can get creative with those buildings. The problem is it's going to take longer. Anyone in the discount world is a candidate for these locations. But in this environment, it's going to take time."

It will take years, said The Retail Connection's Shor. "Some of it won't ever be used as retail again. It will be redeployed."

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