Circuit City shuttering 155 stores, laying off 17 percent of workforce

Circuit City Stores Inc. will close 155 stores and lay off about 7,200 employees, or 17 percent of its workforce, as it continues to restructure its business, the company announced this morning.
The Henrico County-based consumer electronics retailer will shutter about 21 percent of its U.S. stores and exit 12 markets.

The chain also faces credit issues with its vendors. Circuit City said certain vendors have changed payment terms, including demanding cash for inventory before shipping merchandise, as the all-important holiday shopping season approaches. Vendors also have limited the credit available to the company for purchases, including in some cases not providing customary increases in credit lines for holiday purchases.

"While management is working diligently to secure the support of its vendors and believes it has maintained good relationships with these important partners, the current mix of terms and credit availability is becoming unmanageable for the company," the company said in a statement this morning. Circuit City said it is "considering all available options and alternatives to restructure its business." One option, according to people who follow Circuit City, could be filing for federal bankruptcy protection.

The chain said it is in negotiations with its lenders and other third parties regarding various financing alternatives. The store closings will shrink the number of locations the chain operates in the U.S. to 566. Three Virginia stores — Charlottesville, Manassas and McLean — will close.
The company expects store closing sales at the 155 locations will begin Wednesday. The closing sales should be completed no later than Dec. 31.

It also said it would be renegotiating leases in stores that remain open.
The closings come after nearly two years of losses for the chain as it has struggles to compete against rival Best Buy Co. Inc. and retailers such as Wal-Mart Stores Inc.

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