Misery Index

via:  The Consumerist

If you have a Circuit City refund check not deposited before 11/10, it’s going to bounce.

A posting on the internal Circuit City forums from an irate store manager upset over having to shrug his shoulders in response to a customer who had a $2,500 Circuit City refund check bounce elicited this response from the CC accounting team:

Due to the Ch 11 filing, the bank had to put a stop on all checks that had not been deposited.  We WILL be reissuing all bounced checks.  I don’t have an exact date to tell you, but we intend to make good on every single mail refund that bounced.

I wonder when the exact date will be?  Six months from now?  And are they going to issue refunds on the check being returned.  And any subsequent fees associated with said check being returned?

Circuit City's troubles just aren't stopping.  In October CC  according to the Wall Street Journal, was considering plans to shut down stores and layoff thousands in an effort to avoid filing for bankruptcy protection. 

Additionally, CC hired the same firm that oversaw Kmart's Chapter 11 reorganization, as its bankruptcy counsel.  And they had also hired FTI Consulting to help the company devise a turnaround plan.

Then in early November, CC received a warning from the New York Stock Exchange regarding the price of their stock, receiving a "below criteria" warning for CC's $0.26 per share stock price.  If a stock price falls below $1.00 over a 30 day average, a company is warned that their stock will be removed from the exchange, unless in six month they bring the price back up to $1.00 on average over 30 days.

The very next day, CC announced that it was closing 155 stores and laying off thousands.  As a result of CC's dwindling company, suppliers began to demand payment in advance for shipments, or either flat out stopped shipments.

Now, only six days later, CC has filed for Chapter 11 bankruptcy to try to stay ahead of their $898 million debt.  They have arranged $1.1 billion of debtor-in-possession financing from existing lenders led by Bank of America that will allow CC to continue operating under bankruptcy.  But it does require CC to bring that amount down to $900 million by December 29 and use proceeds from its holiday sales to repay other loans outstanding prior to the filing.

The larger problem with this is that if CC does not succeed, landlords of land and spots in malls will be left holding the empty bag due to CC not being able to fulfill their lease obligations.  Under bankruptcy protection a retailer can break a lease with court consent; otherwise, rent is still due on a closed store.

PREVIOUS POSTS:

• Bye, Bye Circuit City?  (10/21)
• Circuit City Stock Gets Warning, Closes 155 Stores, Lays Off Thousands [Layoff Watch/Rumor]  (11/02)
• It's Official. Circuit City Closing 155 Stores. [Layoff Watch/Store Reduction]  (11/03)

"We deeply regret the impact today's announcement will have on our associates, our guests and the communities where these stores are located.  We truly are grateful to each of our associates for their many contributions to the company.  We are also grateful for the loyalty and support we have received from our guests in the impacted communities.  Circuit City will continue to serve guests through 566 stores in the 153 U.S. media markets, via its Web site at www.circuitcity.com and via phone at1-800-THE-CITY"

Via a CC press release (PDF):

"Company Plans to Close 155 Stores, Further Reduce New Store Openings and Renegotiate Certain Leases"

According to a CC Fact Sheet (PDF):

CC had 654 stores in FY 2007, 693 stores in FY 2008, and plans to have 566 stores in FY 2009.  They have stores in 45 states, excluding the closing stores.

Their 2nd Q Net Loss was $63.1 million, their 3rd Q Net Loss was $208 million and their FY 2008 Net Loss was $321.4 million.

In a "Letter to Guests" (PDF):

"Our continued promise is to put you first."

In a "Guest Q&A" (PDF):

"We have made no changes to our policies on gift cards, Circuit City Advantage Protection Plans or any customer commitment."

The 155 store closing list. (PDF)

Previous posts here (11/02) and here (10/21).

Circuit City could be the next major retailer to say bye, bye.  First a "below criteria" warning from the NYSE for their $0.26 per share stock price, and 155 stores closing, with some BS rules for employees affected by this.   [Previous Circuit City posts.]

CC's stock is so low, that it could be delisted from the NYSE.  Currently the 5 Year, 3 Year, 1 Year, YTD and 6 month return are between -93.81% and -98.54%, with the stock down 13.33% to $0.26 per share on close last Friday.  The beginning of October saw the stock at $0.82 per share.  Unfortunately, in addition to major stockholder losses, this also means that they are now on a "probation" of types with the New York Stock Exchange.

The NYSE requires any company's minimum average to be at a minimum of $1 per share for the 30 previous days.  Because of this "below criteria" of their stock performance, Circuit City was notified Oct 24 by the NYSE that its stock listing price is so low it's on the verge of being delisted.  CC has six months to get the stock back to par.  As long as the average 30-day closing price is more than $1 during the next six months, it can stay listed on the NYSE.

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, here,  here, 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.