Circuit City, which had been attempting to survive a consumer electronics retail maelstrom with a bankruptcy protection filing, is shuttering its remaining 567 retail outlets and liquidating.
The country's second largest CE retailer, which had hoped to emerge from Chapter 11 bankruptcy protection by July 1, announced Friday that it will seek bankruptcy court approval to begin the process to liquidate the assets of the company.
Circuit City, which had attempted to battle No. 1 CE giant Best Buy as the low price leader, apparently was unable to find a buyer, attract new investors or even restructure its debt to enable it to continue as a going concern.
"The company had been in continuous negotiations regarding a going-concern transaction," said Circuit City CEO James Marcum in a prepared statement. "Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders to structure a going-concern transaction in the limited time frame available, and so this is the only possible path for our company."
As late as last Friday, Circuit City had said it was talking with two "highly motivated and interested parties" about providing additional financing to keep the struggling retailer afloat, or to purchase the company's assets.
Reuters last week reported Mexican tycoon Ricardo Salinas Pliego was analyzing the business of the troubled electronics chain, in which he holds a 28 percent stake, citing a spokesman for Salinas.
Salinas, owner of a retail and media empire in Mexico and other Latin American countries, became the biggest holder of Circuit City late in 2008, when the company filed for Chapter 11 bankruptcy protection, Reuters said.
Circuit City filed a motion on Jan. 5 in United States Bankruptcy Court seeking approval to put the company up for sale.
The move to liquidate comes after the company last November filed for Chapter 11 bankruptcy protection after shuttering 155 stores.
Circuit City said it will provide more details in the near term about the plans for the liquidation of the stores and other assets, including the company's Web site and Firedog services operations.
As of last August, Circuit City had listed $3.4 billion of assets, $2.32 billion of debt and more than 100,000 creditors, including a host of manufacturers like Hewlett-Packard, Samsung Electronics, Sony, Toshiba, Zenith and others.
It's unclear how much those creditors may recoup in the liquidation. Circuit City shareholders, however, are likely to walk away with nothing. "The company does not anticipate any value will remain from the bankruptcy estate for the holders of the company's common equity, although this will be determined in the continuing bankruptcy proceedings," Circuit City said in a prepared statement.
This year is shaping up to be a watershed year for CE retailers. At the recent Consumer Electronics Show, retail analysts warned that this year will be marked by more store closings.
"It is going to be a tough retail environment in 2009," said Shawn DuBravac, an economist for the CEA. He expects more retail locations to close in 2009 vs. 2008 in the wake of a decline in discretionary consumer spending. DuBravac, in fact, at that time cited the potential of additional Circuit City stores being closed.
"We expect unemployment to go up. We expect stores to close," DuBravac said. "That is what happens in a recession. But we are also seeing nontraditional retailers get into this market. We're seeing consumers buying legitimate consumer electronics products at nontraditional retailers like drug stores."
Tim Herbert, senior director, market research for CEA, said the retailing market is feeling the punch of an economic storm not unlike the dot-com meltdown in 2001 and the recession of 1994. The one difference -- the overall economic environment is far worse today than in 2001 or 1994, Herbert said.
