Is the Circuit City deathwatch on? - Top Stocks Blog - MSN Money
 
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Is the Circuit City deathwatch on?

Posted Apr 09 2008, 02:08 PM by Kim Peterson
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Walk into the Circuit City in my town, and you'll suddenly get a strange sensation. Look around...you're the only person there. Wait, someone must work here. Hello? Anyone? Then head over to Best Buy, which is packed with customers and ringing up sales.

Why is Circuit City struggling while Best Buy shines? There are many reasons: prices, marketing and sales strategy top the list. Look at the stock prices of the two: Circuit City shares have fallen from nearly $19 a year ago to $4.30 today, while Best Buy shares have stayed in the $40 to $50 range all year.

Circuit City might see some big changes soon. BusinessWeek reports that the retailer may have hired Goldman Sachs to look into sale possibilities. This comes after the company's turnaround plan has failed. Analysts say one of the worst decisions executives made was to fire 3,400 of the most experienced workers and replace them with lower-paid ones, according to Business Week. Customer service went out the window.

There is some good news. After a money-losing streak that lasted several quarters, Circuit City's cost-cutting has put it back in the black. The company made $4.85 million in the quarter ended Feb. 29. Yet that profit wasn't due to a sales boom: same-store revenue fell 10.4%, while overall revenue fell 8% to $3.65 billion. Best Buy same-store sales fell just 0.2% in the fourth quarter.

Today, Circuit City said it faces the "toughest macroeconomic environment in years." A Sanford Bernstein analyst said the company's outlook is weak due to sluggish store sales and margin erosion.

What can be done to save Circuit City? One of its most vocal shareholders wants to replace all 12 members of the board and sell the company. CEO Philip Schoonover is pushing ahead with a turnaround plan that includes improving what he calls the "selling culture," cutting prices on warranties and unveiling smaller concept stores called "The City."

These are tough times for any retailer, and Circuit City is smart to be exploring a sale. But in this economy, and with a huge rival like Best Buy, can anything be done to save this company? 

Further reading:

Why Circuit City must be sold now

The Why of Best Buy

Circuit City and profits: still more questions than answers 

Circuit City Q4 earnings call transcript 

Comments

 

In the last year I have purchased a 50" HDTV, Bose Surround system, and a new laptop computer!  All purchased at Best Buy CC was never in my considered set, know why?  Because CC betrayed their experienced employees,  Who are now going to have the last laugh!

I worked for Best Buy in Wisconsin for 1.5 years. We always strived for customer service. Walk into Circuit City, and you have to find an employee to help you. Their prices and warranties at CC need alot of work also. I say close CC and goto Best Buy for your purchases.

Put Circuit City and Home Depot in the same boat. Lay off all the knowledgable sales people and hope the customers don't notice. How foolish!

tgunn4

...I agree  ... my home town has a fairly new Home Depot... inside it looks like Katrina just hit it...and no service nor knowledgable person around....

lwj

There customer service is the worst I ever seen. The employees go out of there way to not help you.

I was in Circuit city store # 5215444 located off I-270 in St. Louis, Mo.

Was going to buy the 52 inch Sony Briva xbr4 120mz. priced at $ 2999.99

The store manager name Micah would not sell me the Sony t.v. unless I purchase the HDMI cable that was priced at $ 149.00.  The same cable is sold at other outlet such as Best Buy and wholesale club Sam for far less.

I tried to call the 1-800-251 2665 and file a complaint and was placed on hold for over 30mins.  The call ended up oversea..asked for US center and it took another 45mis and the person i contacted was not interested in me or my compliant.  

Tried to contact Scott the regional manager and he never called back.

I was told that only the store director can decide what to sell....????

I do not think they are interested in selling anything at these store.

They just do not care if you buy from them or not.

At one time Circuit City was the BEST store in town and these people allowed it to go under. Good thing i dont own any stock in them.

Now,  Sam Club is selling Sony 52 inch 120mz t.v......Thank you Mr. Walton !

Lost loyal customer.

Doesn't suprise me. I bought a computer at cc and they had the wrong price up on the system I purchased. Instead of admitting their mistake, they tried to give me a lower system. When I confronted them with this they told me that someone had changed the sign. They were going to just give me a lesser computer and hope I didn't notice. Its funny that the 2 sales people helping me didn't notice the price was wrong. I haven't been back to Circuit City since and I will never go back.

The last time I went to CC and inquired on an electronic device...the sales person had absolutely no clue about the specific item I needed to purchase. Out of frustration  he invited another sales rep to assist but again it was over his head. I will never shop there again. Tony

Well it's interesting. I live in Florida and in my area we are getting a new CC. It's coming in Fall '09. I do not know if it will be a Big or Small store. I like CC. I like some

of their deals on Video Games. BUT the workers need a course on dealing with the people. Some of that has got to change.

let this be a lesson to other retailers we are tied of bad service ,poor help long lines are money is good any where and yu see whats happends when yu cut service who could be next maybe a home depot  lowes target yu cut cost too save money see what yu losted us customers never come back and yu good out of business wake up before its too late

Try to return a piece of merchandise to Best Buy 15 days after you bought it.  Good Luck!!!  At least Circuit City has a reasonable return policy.  As to prices, if you think there any bargains at Worst Buy you must be toking!

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