Monday, November 10, 2008

Circuit City files Chapter 11

It has seemed inevitable -- the question gradually becoming when rather than if. We had a post not quite a month ago reporting speculation by an analyst that CC would file for bankruptcy early in 2009. The problem is that once rumors reach that level, they become self-fulfilling. Creditors reading such things begin cutting back, vendors hold off shipments, and ... bankruptcy follows.

So the only surprise was only that they filed before Christmas rather than after:

Circuit City, the biggest electronics retailer in the U.S. until the mid-1990s, filed for bankruptcy before it had a chance to take in cash from the holiday selling season, when it gets more sales than any other time of the year. [...]

"It's very incongruent for retailers to file bankruptcy before Christmas,'' Burt Flickinger, managing director of consultant Strategic Resource Group in New York, said in a Bloomberg Television interview.

However, subsequent the the analyst speculation mentioned above, there was the news that NYSE had warned Circuit City about their stock price dropping too low to meet Big Board standards, and then the announcement last week that CC is closing 155 stores. The combination proved too much for the vendors

A list of creditors is included in the linked report. H-P and Samsung are the biggest, each on the hook for more than $100 million.

Circuit City will continue operations as it attempts to reorganize.

No comments: