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 Sterling Heights, MI, Circuit City has much lower prices than Best Buy, including Firedog vs. Best Buy's Geek Squad.  Plus, the service is comparable and the store is always busy.  Whatever they are doing there seems to be working (maybe they should copy it across the country).  And, earlier this year, I had a problem with Firedog which they went above and beyond to fix, so I do know what I am talking about.  At the time, there were issues with store management, which they quickly fixed.  However, the prices truly are much, much better than Best Buy.  If you buy something at Costco, who does the installation for you and what are their prices like?  You have to look at the whole picture.

Sorry to disagree with the love fest but Best Buy is no bed of roses either.  They only remain in business today because they ran the competition out of business years ago, see the Walmart business plan.

I agree that Circuit City has continued to decline.  It is a ghost town in our city also.  However, I will not patronize Best Buy.  Their ads in our local paper are full of loss leaders and are never in stock.  Best Buy issues "rain check" but per Best Buy the "identical" advertised item never comes back in stock.  I have wasted too much time traveling to their store only to come away empty handed.

is now a good time to buy CC stock?

I recently purchased $6100.00 in new TV, surround sound, etc., including installation (thought it would be better thant I could do).  This was a LCD that was not being mounted on the wall, but was sitting on a unit (which they sold me), but I wanted speakers, etc. hooked up professionally.  Guy came out and ran wire under oriental rug to speakers instead of around room.  Did not program equipment and remotes, and off he went.  I went to Circuit City where I purchased and complained, and was told sorry, regular guy was sick, and if this guy did anything at all then I could not get refund.  Too BAD.   That's why they are going down hill.  Next time it will be Best Buy even if it costs MORE.

Dale Irwin

What's the matter, don't like seeing your fellow religious zealouts outed?

I prefer Circuit City to Best Buy for many reasons, but I do admit to buying little in either.  I use Best Buy as a 'hands-on-product-evaluation center' and then go home and order the item online for less.

I can not argue with those who have worked for CC and have commented about the working conditions, but for them and others who have added comments such as; ".. it is like a ghost town." or "...get the same flat screen monitor at Costco for $100 cheaper!", I have to disagree.  I always do a thorough search and review process on the internet to find out as much as I can about a product I am interested in purchasing and other than making an online purchase with Amazon.com. I find that CC is very competitive in pricing and in availability at the local store level.  I have also found the female salesperson at one of our local stores to be very current and knowledgable about the products I am looking for and have researched.  Id I ask, she has always been very helpful in making other suggestions regarding other competitive products. Now, regarding the number of customers who are shopping at the same time I am, as far as this CC store, there seems to always be a good share of people shopping when I do and I do most of my shopping when I know (or hope) the number of customers in the store is not too heavy - that way I do NOT have to fight the crowd for a parking space, for mobility around the store and for service to speak with the available salespersons.  However, I will admit - their prices on their DVD's and Blu-Ray Discs are always much higher than what I can find at either Best Buy or Target.  But regarding the other electronic hardware, I have made my last two major purchases in the past three to four months at this CC store, with no complaints on service or the price.

I bought 2 televisions from CC.  The first a flat screen was sold to me without speakers.  When I got home and realized this I called them and they said they told me.  After several questions from me, they admitted that it was an older model and the speakers were not being made anymore  I like being called a liar about as much as the next person so you know how that went.  If they were honest from the get go I would have proabably bought at a minimum speakers if not some type of speaker system.

2nd television I bought broke less than a year after purchasing.  CC said since I didn't buy their insurance I had to deal with the manufactuer.  That in itself was a nightmare. I had to go back to CC to get a copy of my receipt to send with the tv and CC told me they could not fax or email the copy I needed to come to the store to pick it up.  Wrong thing to tell a customer after hosing them over with a crappy product.  I told as many people I could about the quality of items being sold as I could while picking up said receipt.

When did selling a quality product at a quality price become so obsolete?  CC will never see a dime of my money.

I did shop at my local C.C. just the other day.  As a matter of fact the DVD I wanted was not available at Best Buy, Blockbuster, Target, or Wal-Mart.   I was lucky the movie was so old and dusty no one else would buy it.  It was also in the wrong section, drama found in horror.  So I said thanks to the employee I forced to take my money after a long conversation on weather he new how to run the register.....

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