Opher BanarieCircuit City To Close Stores
November 3rd 2008 17:43
Reports of financial difficulties at Circuit City appear to be confirmed with this morning's announcement that the company will close 155 stores by year-end. As reported by AP, these decisions are part of an attempt to return to profitability
Approximately 7,300 employees will be laid off and the company will leave 12 markets entirely, including Phoenix and Atlanta.
The move appears to be driven by a combination of poor sales and vendors who are unwilling to give credit to the retailer. Retailers often get credit terms to pay for inventory, intending to see the merchandise before payment is due so that cash flow can be optimized. With the instability of the credit markets the last few months, many companies have reported difficulties in getting credit for normal operations. This is one reason the Treasury Department has pushed billions in cash to banks in an attempt to re-start the normal credit cycle.
But with the slowing economy and the prospect of more layoffs looming, how will holiday spending measure up at a retailer that may appear to be financially unstable? Would you buy a big-ticket item (digital TV, high-end camera, etc.) from a retailer that may not be around for an after Christmas exchange or repair?
UPDATE: Circuit City has filed for Chapter 11 bankruptcy because it is unable to get credit for inventory management. Will holiday shopping be enough to bring back this retail giant? No one knows, but if not, what will happen to other retailers like Best Buy and Wal-Mart?
Approximately 7,300 employees will be laid off and the company will leave 12 markets entirely, including Phoenix and Atlanta.
The move appears to be driven by a combination of poor sales and vendors who are unwilling to give credit to the retailer. Retailers often get credit terms to pay for inventory, intending to see the merchandise before payment is due so that cash flow can be optimized. With the instability of the credit markets the last few months, many companies have reported difficulties in getting credit for normal operations. This is one reason the Treasury Department has pushed billions in cash to banks in an attempt to re-start the normal credit cycle.
But with the slowing economy and the prospect of more layoffs looming, how will holiday spending measure up at a retailer that may appear to be financially unstable? Would you buy a big-ticket item (digital TV, high-end camera, etc.) from a retailer that may not be around for an after Christmas exchange or repair?
UPDATE: Circuit City has filed for Chapter 11 bankruptcy because it is unable to get credit for inventory management. Will holiday shopping be enough to bring back this retail giant? No one knows, but if not, what will happen to other retailers like Best Buy and Wal-Mart?
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