US Retailer Circuit City Files for Bankruptcy Protection
On Monday, United States electronics retailer Circuit City announced that it would file for Chapter 11 bankruptcy protection. Second largest in its field, behind Best Buy, the company has previously announced that it would close down 155 of its locations leaving an estimated 8000 employees jobless.
The retailer also said more cutbacks will be on the way. Circuit City isn’t the only electronics retailer in trouble as Tweeter is closing up its stores too after filing for bankruptcy a year ago. Other retailers are also cutting back. CompUSA closed most of its stores during the holiday season in 2007. Best Buy, the biggest American retailer in this class, has seen its shares drop by 50 percent this year.
“Circuit City was incredibly successful in the 1980s and 1990s, but they never changed after that,” says David Schick, an analyst at Stifel Nicolaus.
In August, Best Buy reported that its profits had gone up to show a quarterly profit of US$200 million. Meanwhile, Circuit City reported a loss of $239 million in September. The reason behind Circuit City’s downfall was that the company didn’t secure prime real estate locations making customers go to more convenient locations like Wal-Mart. The company also failed when they stopped selling appliances and missed out in big store promotions like the company Apple Inc.