News
Analyst: Circuit City will go bankrupt
Ben Furfie Oct 14 2008, 12:18pm
Comments (8)
USA: Question is no longer 'if, but when,' according to KeyBanc Capital Markets
Circuit City will enter Chapter 11 bankruptcy protection by as early as the first quarter of 2009 – and is unlikely to recover – according to research analyst at KeyBanc Capital Markets, Bradley Thomas.
Writing in his research note, he said: "We believe a Circuit City bankruptcy has become a question of when rather than if. We now expect bankruptcy in 2009, perhaps as early as the first quarter."
He warned, however, that the 'when' part of the assessment would be dictated by vendors, saying that should one vendor pull its products from Circuit City, others would likely follow, speeding up the likelihood of it filing for Chapter 11.
He added that: "We believe the likelihood that Circuit City can emerge from bankruptcy and its remaining number of stores post-bankruptcy are diminished by the weakening environment."
It isn't all bad news according to Thomas, though. Best Buy is likely to benefit from the demise, suggesting that the extra custom from ex-Circuit City customers would be large enough to stem the effects of falling prices and lower customer spend.
He added that Best Buy could see its shares rise by as much as 37 cents per share if Circuit City was forced to close 300 of its 700 stores. At the time of writing, shares in Best Buy were 27.13 cents a share vs 0.40 cents a share for Circuit City.
Source: StreetInsider
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Comments
“Not good”
Posted by: Craig - Oct 14, 2:14pm
this is very very bad news for the consumer world with no CC and just BB. Some people will always prefer the slower retail stores like CC over the over stuffed BB stores. Can't say shoppin in a store full on little mall rats is fun.
This is the first step to more sales via internet.
“Re: Not good”
Posted by: bsdbum - Oct 14, 3:15pm
I prefer CC over BB anyday. Its cheaper if you shop around, especially online prices vs instore prices and they will be happy to price match it at checkout. Also with the switch over for local TV broadcasing stations from analog to digital coming in Febuary I believe it will be profitable for all electronic stores including CC and BBY.
just my $.02
“Re: Not good”
Posted by: liz - Oct 14, 3:18pm
Sales via internet = good
Retail closings = bad.
There are too many people who use retailers exclusively who don't know/cant learn how to buy things online; the customers who will be forced into best buy for a technology store and wal-mart for prices. It's either wal-mart with no support or best buy with over-priced misleading support.
Competition = good!
Also think of the jobs, man! thousands of people are employed by CC.
“This Just In”
Posted by: liz - Oct 14, 3:22pm
KeyBanc Capital Markets is heavily invested in Best Buy- maybe we shouldn't trust what they say about CC?
“Re: This Just In”
Posted by: Kevin - Oct 14, 4:41pm
Circuit City killed off the commission structure that rewarded those salespeople who sold millions a year in product. They put them on an hourly wage that pays less overall and made them lazy. Though, those people still sold more than the newbie making half as much.
Circuit city needs to bring back the commission structure that made it successful in the first place. Yes, they'll have to pay out higher salaries. Yes, some sales people will make more than district managers do. My opinion is that if the salesperson is selling 2 million dollars a year worth of product at 30 percent margin average. Why shouldn't you be paying them 120-150 grand a year? You keep consistent sales numbers, good margins and he gets paid to live the lifestyle he/she wants to live.
Bring back the commission structure and watch your sales double year over year.
“Re: Re: This Just In”
Posted by: jesse - Oct 14, 7:06pm
LEt me throw this out to you, I see all these posts saying cc is better cause bby is over priced, let me say that 1 best buy will match any competitor price, 2 of course cc price will be lower there in so much trouble they price the product so low they barely make money, the idiots that work for the company will also give you a product even if they dont make money on ( for instance i had a bby employee write down a price of a tv that was lower than cost, went to cc sadi bby is giving me this tv for this price, cc took an additional 100 off, and offered me free install.) How is a company suppose to come back if they are offering product that they will not make money from. Also as far as commisioned sales based, that really has nothing to do with the sales they recieve, look at bby they havnt been commission for how long now, the problem is cc should have took commission away awhile ago, problem is employees lost the commission now they employees dont give a damn about if they make a sale or not and the problem with that is the management let the employees get away with it, problem comes down to the management not doing there damn job. If cc can hire people that will do there job and not dissapear from the sales floor maybe they wouldnt be in the spot they are in.! And if cc does go under i feel bad for the employees because the econ omy already sucks and its hard to find a job.... but blame it all on the damn company that could have tried harder and managemnt did nothing about.
“Re: Re: Re: This Just In”
Posted by: Derekat - Oct 14, 8:10pm
Did you know this board is censored. You are seeing a false representation of the real comments. Not really good enough Guys.
“Re: Re: Re: Re: Re: This Just In”
Posted by: Ben@PCR - Oct 15, 9:28am
Derek. Your comment was the only one removed, because it was inappropriate.
We didn't write the research note, we are just reporting on it. This website is for the trade and we have a duty to report what analysts are doing in the industry, regardless of whether that is good news, or bad.
If you wish to chat more about that, feel free to email me at my email address [email protected] or via the "Email the Author" button at the bottom of the story.