Circuit City Woes Increase With Loss Of Advisory Recommendation To Manufacturers To Ship Goods

Richmond, VA (AHN) - American big-box electronics retailer Circuit City has lost the recommendation from a firm that advises manufacturers whether to ship goods to retailers.

Credit rating and services firm Bernard Sands withdrew its recommendation to ship goods to Richmond, Virginia-based Circuit City after the electronics chain posted a quarterly loss more than triple its year-earlier loss.

Observers say that the withdrawal by Bernard Sands is a signal of concern that the electronics retailer might have difficulty in paying its vendors.

Last week, Circuit City had reported a net loss of $239.2 million, or $1.45 a share, for the quarter ending Aug. 31, compared with a prior-year net loss of $62.8 million, or 38 cents a share. Net sales dropped 9.6 percent to $2.39 billion.

The drop caused the company to announce it wouldn't open 16 of the 26 stores it had planned for the current fiscal year. It also announced it had hired outside advisors to help it restructure to improve its operating and financial performance. The company has seen only one profitable quarter since the second quarter of 2007.

It is the nation's No. 2 consumer electronics store is facing stiff competition from Best Buy, but Wal-Mart Stores Inc., is reportedly also taking market share.

Compounding the problem is a cash flow problem to get inventory into the stores with the make-or-break holiday shopping season approaching.

Circuit City had already borrowed $215 million against its $1.3 billion inventory-secured line of credit during the quarter. Adding to its money crunch is an expected $80 million federal tax refund that didn't come in the second quarter and has been delayed indefinitely.