Circuit City Conserving Cash By Closing 155 Stores, Laying Off 17% Of Its American Workers

November 3, 2008 10:36 a.m. EST

Richmond, VA (AHN) - No. 2 U.S. consumer electronics retailer Circuit City on Monday announced it will close 20 percent of its more than 700 stores in 55 markets by Dec. 31, laying off about 17 percent of its American workforce.

Circuit City vice chairman and acting president James A. Marcum called the closings a "difficult, but necessary" decision.

Saying that the weakened economic environment has slowed down consumer spending, Marcum said that had impacted not only Circuit City's business, but its vendors as well.

"The combination of these trends has strained severely our working capital and liquidity," Marcum said in a statement.

Some 155 stores will be closed to conserve cash, including those in Atlanta, Georgia and Phoenix, Arizona. The move comes on the cusp of the make-or-break retail holiday shopping season.

Circuit City also plans to renegotiate leases on other stores to reduce rent or cancel leases. It also hasn't ruled out additional closures and layoffs.

Stores chosen for closing were either under performing in sales revenues or no longer fit business goals, the company said in a statement. The stores won't open on Tuesday in preparation for going-out-of-business sales beginning Wednesday.

The company said the global financial crisis is affecting credit and making it more difficult for manufacturers to supply Circuit City. The Richmond, Va.,-based company has seen sales drop for six consecutive quarters, losing market share to Best Buy Co. and Wal-Mart Stores Inc.

Circuit City stock is in danger of being delisted by the NYSE because it keeps dropping below $1 per share in price.