Bye, Bye Circuit City?

10/21/2008 07:39:00 AM

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circuit_city_logo Gee maybe those fees of $40 to install a USB keyboard are finally catching up with CC.  And maybe their less than desirable customer service (rude, uneducated, incompetent and simply just bad) has something to do with it......

Last week CC announced that they decided that consumers want to see the same prices in the stores as on-line with a "One Price Promise" promotion in a press release basically announcing they are price matching what is listed on the Internet vs what is listed in store.  Of course they have had a policy of price matching competitors however, when you take the ad to the store, you get responses such as "they aren't our competitor", "the ad doesn't list the item number exactly", "we don't have anymore of those", or "we don't price match anymore if it's below our cost."  And then there is the possible issue of submitting for rebates when price matching, and CC refusing the rebate since the price of the item falls below their cost.

And lets see how this goes, just like the 24 minute in-store pickup, which ends up being a disaster.  And "issues" of not honoring ads instore and guarantees.  Or just plain out selling you empty boxes.  For a few recent examples, check out The Consumerist here, here, herehere, and here.

Maybe if Circuit City would actually train their employees in customer service, and follow established corporate rules for customer service, returns and just business operations, then CC wouldn't be in the position they are.

"One Price Promise assures CC shoppers that they will be treated fairly and equally regardless of how they shop with us," said Jeff Maynard, vice president, marketing at Circuit City Stores, Inc. in a press release. 

"We plan to let consumers know about One Price Promise in a big way," added Maynard. "We are launching an aggressive national advertising campaign that includes print, broadcast, Internet and in-store marketing tools..."

Yesterday however, Circuit City according to the Wall Street Journal, is considering a plan to shut down at least 150 stores and cut thousands of jobs to avoid filing for bankruptcy protection.  By shutting the stores, CC hopes to liquidate about $350 million in inventory, which it could use to pay off certain real-estate costs and pressure existing landlords to renegotiate some leases many of which CC regards as overpriced.  Of CC's $3.98 billion in off-balance sheet obligations related to operating lease commitments, more than half is tied to leases with more than four years remaining and about 80 are for vacant locations.

In the meantime, CC's advisors are doing what they can to line up additional financing, but so far lenders have shown little or no interest at all.

Seems that CC has hired the same firm that oversaw Kmart's Chapter 11 reorganization, as its bankruptcy counsel.  If Circuit City would file, it would make it the largest retailer to enter bankruptcy protection in several years, said the WSJ.

CC has also hired FTI Consulting to help the company devise a turnaround plan.  FTI has advised on several troubled retailers, including Bombay Co and Winn-Dixie Stores.

They have also hired investment bank Rothschild Inc. to guide talks with banks in hopes of securing emergency financing.

"We're not going to speculate on rumors and comment beyond our original statement," said CC spokesman Jim Babb in a response to an emailed question by Market Watch.  The company's management team, board of directors, and its strategic financial advisers are conducting a "comprehensive review" of all aspects of its business to determine the best methods of accelerating its turnaround and delivering substantially improved operating and financial performance, the company said in a written statement.

"While we would appreciate [Circuit City] for its attempt to stay solvent, we remain highly pessimistic on holiday sales and on consumer spending in 2009," said S&P Michael Souers.

As of Aug 31, CC had 714 stores in the U.S> and 772 stores and dealer outlets in Canada, employing about 45,000 people.  Share of CC fell 2.6% to $0.38 a share yesterday afternoon, erasing earlier gains and wiping out 91% of their value this year.

Perhaps bargains will be found for Christmas via CC.  Remember, your TV needs to be digital soon!  And perhaps CC is "banking" on this to help them out of their hole however, I don't think it's going to happen.

And if they do a go out of sale, chances are Gordon Brothers Retail Partners, who were responsible for the liquidation of CompUSA, Sharper Image and Tweeter will almost certainly buy what's left or at least get hired to run the "Clearance".  Gordon Bros has a reputation of increasing prices, and then discounting and also shipping out all the good items before the clearance sales even begin, leaving nothing but high price junk to sell.

And I wouldn't even "think" of purchasing an "extended warranty" on anything bought there now, as if I would ever recommend purchasing an "extended warranty" from CC anyway.  Which brings up a question, if CC goes bankrupt, and if you purchased an extended warranty from CC, what happens then?

And we as consumers are left with only Best Buy to monopolize the market.

And recently Mad Magazine did a parody of a Circuit City advertisement, needless to say, a higher up demanded that all issues of Mad Magazine in store on the racks be destroyed.


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