Is there more trouble in the City? In another indication of Circuit City's
According to a press announcement, the move is a continuation of Circuit City's attempts to bolster its financial performance. The company said an analysis of its markets showed that for these particular stores, "the trade area can no longer support a Circuit City Superstore, leaving the locations with no reasonable expectation of positive cash flow in the near future."
In the announcement, Circuit City said fiscal fourth-quarter earnings will take a $35 million hit, after taxes, related to the closures. The stores in question had revenues of $151 million for the 12 months ended Dec. 31.
It's no secret that Circuit City has been struggling under competition from archrival Best Buy
Early last month, Jeff Hwang reported a surprise fall in Circuit City's December same-store sales, underlining the retailer's recent struggles. Meanwhile, Rick Munarriz and Dave Marino-Nachison have sparred over the outlooks for Circuit City and Best Buy.
The good news is that Circuit City stood by its plans to open 65 to 70 Superstores in the current fiscal year -- although a little more than half of these are simply relocations of existing stores. However, one might hope that the markets are chosen carefully. After all, the company's press announcement said that there are other nearby Circuit City Superstores in the market areas of the imminent store closures, making one wonder if cannibalization occured.
The store closures will leave the company with 600 stores, a number that nearly matches that of Best Buy. While Circuit City's moves are meant to transform itself into a leaner, more appealing place for consumers, it can't afford to lose too much traction now.
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Alyce Lomax owns no stock in any of the companies mentioned. She welcomes your feedback via email.