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

 

I love Circuit City. Way better than Best Buy.  You can't beat their online sales and open box returns.  I got 20' Sharp Aquos for $230 same set was $399 at BB.  Their website is easier to navigate and service is better on returns.  The store near me is just as nice as BB.I sure hope the don't go under.  If they do BB will only get worse.

I stoped shopping at Circuit City 3 years ago when they charged me a restocking fee for a returned item.  I wrote the President about the restocking fee a said it was a bad idea because their competitors (Best Buy) don't charge a restocking fee for returned items and they have lost my business.  I recieved a letter saying the restocking fee was there company policy and did not say anything about losing my business.  They deserve what they get

When you replace seasoned workers with high school dropouts to save money...

you lose service... Circuit City and Home Depot have taken the same path to the grave and it can't happen too soon for me.  Costco Rocks !!! and they know what service is.... on any given day go to Costco, Best Buy... then Circuit City and Home Depot...  duuuuhhh..... Burn Baby Burn....

i also visited a circuit city ,walked thru the door and couldnt even find a phone cord on the shelf,walked back out without a person talking to me

During Christmas, i wanted to buy Guitar hero III which was out of stock but was told a new shipment would be in the following week.  Low and behold, it wasn't.  I then spoke to a young boy in customer service and he claimed it was being recalled due to copyright infringements so i accepted THAT reason and went on my way.  I then decided to try once more to Amazon.com and wouldn't you know, they were selling it for the same amount and charged no shipping fees.  I bought it and was very happy and satisfied.  So this comes to NO SURPRISE as to why Circuit City is failing and all i have say now is BYE BYE and GOOD RIDENCE!!

Sam Wartsel must be spinning in his grave seeing how his company has flopped in the past 10 years. Circuit City became the giant electrocics retailer by having the most knowlegable commissioned sales staff, the 1st with a low price guarantee and 10% challange for 30 days after the purchase, and the best inter-store linked computer system that allowed customers in all states to shop like they were at their own store. First the cut Major Appliances from the store profile. They were the number 2 retailer of appliances behind Sears. Then they cut the commissioned sales staff and hired a bunch of snot nosed kids that could make the same money keeping thier hands down their pants as they could sell (or clerk)something. The drop of having professionally trained commissioned sales people is when the company started its nose dive and why it will never regain unless someone with old school knowledge of the complete workings of why that company WAS great can get it back and set it on the right course.

What a shift! I used to love Circuit City, the sales people knew what they were selling and they were knowlegable and trained to sell the products. I HATED walking into a Best Buy with all the noise and high school kids as sales people.

Since last years 'turn around' for Circuit City it has taken a nosedive. They got rid of their good sales staff (including my brother who had worked there for 20 years!) and put new 'sales people' they could hire cheaply.

(PS There are MANY lawsuits pending from former CC employees)

Yeah. Circuit City sucks. When you rip off consumers, they don't come back. Funny how that works.

A Sales Rep at CC Asked My Wife If She Need Any Help With Anything And My Wife Was Looking At Camera's And She Asked If The Only Difference Between 2 Models A 750 And A 1000 Was The Number And The Clerk Said That Sounds About Right

EDITOR:

This statement should be removed:

NOT appropriate.............................

scott keato (Posted 04.09.08 4:24 PM)

good for them. circuit city is owned by far right wing hating evangelical christians.

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