What began 60 years ago as a small TV store in Richmond, Virginia ended yesterday as Circuit City closed its 567 remaining American stores.
For the last month and a half, liquidation companies have conducted going-out-of-business sales for what had been the nation's second-largest consumer electronics retailer, selling its remaining $1.7 billion worth of inventory weeks sooner than expected.
After the bust Circuit City will leave more than 18 million square feet of vacant space in a faltering real estate market, and more than 34,000 employees will be jobless. Shareholders will likely get nothing and creditors may receive far less than what they are owed.
Circuit City filed for Chapter 11 bankruptcy protection in November with hopes of emerging as a stronger company able to compete in the ever-expanding marketplace; shedding its $2.32 billion in debt and getting out of older real estate. The company was unable to work out a sale or secure new financing.
Circuit City owes nearly $625 million to its 30 largest unsecured creditors -- mostly electronics manufacturers. They must wait to be paid until secured creditors such as banks are satisfied.
At its height, Circuit City had more than 700 stores. It faced increased competition, pressure from vendors and waning consumer spending. Ultimately, the hobbled credit market and consumer worries proved insurmountable.
Circuit City, which posted losses in seven of its final eight quarters, had its brand value diminished in the 1990s as it lost significant traffic to rivals like Best Buy, Wal-Mart and Costco that expanded their electronics departments.
Alan L. Wurtzel, son of company founder Samuel S. Wurtzel and himself a former chief executive of Circuit City, has previously said the company didn't take the threat from Best Buy seriously enough and at some points was too focused on short-term profit rather than long-term value.
Still, Circuit City took arduous steps in an attempt to turn around its struggling business. In 2008, it defused a proxy battle, opened its books to potential buyers like Blockbuster, changed management, closed stores in some locations and tested smaller concept stores in others. It laid off about 3,400 store workers in 2007 and replaced them with lower-paid employees, a move analysts warned could hurt morale and drive away customers.
Circuit City also had hoped to make up for its diminished product margins with its service and installation business called Firedog, which opened in 2006 - four years after Best Buy purchased the similar Geek Squad service.
Stephen Baker, vice president of industry analysis at a market researching firm, said, "Every time there was a crossroad ... they almost always did the wrong thing."
Baker pointed to many missteps in management, including not declaring bankruptcy sooner, not getting into the music and movie business earlier, takeover bids in the mid-2000s, and exiting the appliance business in 2000. "When you make that many mistakes, eventually you end up at the edge of the cliff," he said.
The Circuit City name may still live on.
Bell Canada is buying a chain of 750 The Source by Circuit City electronics stores across Canada. Hilco Merchant Resources said it hopes to buy the brand name and Website. (info from The Associated Press)