Circuit City to shut stores, realign top ranks
RICHMOND -- Circuit City Stores Inc., the nation's number two consumer electronics retailer, said yesterday it plans to close seven domestic superstores, a Kentucky distribution center, and 62 company-owned stores in Canada to cut costs and improve its financial performance.
The closings will take place over the next six months at an expected total cost of $85 million to $105 million, all to be incurred in the current fourth fiscal quarter, which ends Feb. 28, Circuit City said.
"Because of the intensified gross margin pressures that we saw in the third quarter within the flat panel television category, we launched efforts to accelerate the timing of planned initiatives to improve sales and gross margin, as well as improve the efficiency of our expense structure," chief executive Philip J. Schoonover said in a statement.
Shares of Circuit City rose $1.07 to close at $21.67 on the New York Stock Exchange.
Circuit City would not identify the stores to be closed because company officials were in the process of notifying employees. The stores will be closed Monday, then reopen Wednesday for clearance sales, spokesman Bill Cimino said.
The company could not immediately determine the exact number of employees who would lose their jobs. The distribution center employs 12 people, and each of the seven superstores slated for closing employs about 30 full-time and part-time workers, Cimino said.
Circuit City operates through 643 superstores and 12 other locations in 158 US markets. The international segment has more than 800 retail stores and dealer outlets in Canada. The company also sells it products online.
The retailer, second behind Best Buy Inc., also is realigning its management structure.
It named a new merchandising officer, David L. Mathews, who replaces Douglas T. Moore, executive vice president and chief merchandising officer. George D. Clark Jr. will lead Circuit City's retail channels.
The seven domestic superstores slated to close by the end of February generated $71 million in revenue in 2006. Separately, one superstore will be closed this month in advance of opening a replacement store in the first fiscal quarter of 2008.
Circuit City has struggled for market share against Richfield, Minn.-based Best Buy.
Both have seen fierce competition from Wal-Mart Stores Inc., which lowered prices for key products such as flat-panel televisions this past holiday shopping season, forcing Circuit City and Best Buy to follow suit and cutting into their third-quarter results.