Friday, January 16, 2009

Circuit City goes bankrupt

The electronics retailer is closing all 576 of its U.S. stores, while laying off its 35,000 employees. From MSNBC News:

Circuit City Stores Inc., the nation’s second-biggest consumer electronics retailer, reached an agreement with liquidators on Friday to sell the merchandise in its 567 U.S. stores after failing to find a buyer or a refinancing deal.

The company said in court papers it has appointed Great American Group LLC, Hudson Capital Partners LLC, SB Capital Group LLC and Tiger Capital Group LLC as liquidators. The company’s move to liquidate, first reported by CNBC Friday morning, means the retailer’s 35,000 employees will likely lose their jobs, the financial news channel said.

Calls to the Richmond, Va.-based company and the liquidators were not immediately returned to the Associated Press.

Circuit City filed for Chapter 11 bankruptcy protection in November as vendors started to restrict the flow of merchandise ahead of the busy holiday shopping season.

It had been exploring strategic alternatives since May, when it opened its books to Blockbuster Inc. The Dallas-based movie-rental chain made a takeover bid of more than $1 billion with plans to create a 9,300-store chain to sell electronic gadgets and rent movies and games. Blockbuster withdrew the bid in July because of market conditions.

Circuit City, which said it had $3.4 billion in assets and $2.32 billion in liabilities as of Aug. 31, said in its initial filings that it planned to emerge from court protection in the first half of this year.

Here in the San Jose Bay Area, Circuit City could not compete with Best Buy on the value of consumer electronics, Wal-Mart on the prices of such consumer electronics, or even Fry's for the price and variety of computer products. It is no wonder Circuit City went bankrupt.

And Circuit City will be laying off 35,000 employees. Not only will that increase the U.S. unemployment rate, but you can bet that those 35,000 employees will be cutting whatever spending they may have been planning just to say financially afloat. More economic and unemployment pain for the U.S.

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