Tale Of Two High-Tech Retailers: Circuit City Struggles, Best Buy Thrives

Circuit City is considering closing at least 150 of its 714 U.S. stores, while the first three Best Buy Mobile stores are opening this month.

W. David Gardner, Contributor

October 20, 2008

2 Min Read

In the ongoing battle of giant IT retailers, Circuit City is contemplating a wave of store closings and employee layoffs while Best Buy is planning to launch a wave of Best Buy Mobile stores this month.

Circuit City is considering closing at least 150 of its 714 U.S. stores and laying off a portion of its 45,000-strong employee staff, according to a report in Monday's Wall Street Journal. The company, which carried out a management change less than a month ago, is racing to work out a reorganization plan before the holiday selling season gets under way.

Circuit City bet heavily on high-definition TV, but plunging prices in the category and tough competition from Best Buy and Wal-Mart hampered its sales and profits. On the other hand, Best Buy focused heavily on selling mobile phones and other mobile devices. The first three Best Buy Mobile stores are opening this month in Bloomington, Minn.; Fairfax, Va.; and Schaumburg, Ill.

Circuit City has hired a law firm with expertise in bankruptcy proceedings and FTI Consulting to work on a reorganization plan, according to the newspaper. Rothschild is working to obtain funding.

A Circuit City spokesman declined to discuss details of the plans, but stated: "The management team, board of directors, and its strategic financial advisers are conducting a comprehensive review of all aspects of our business to determine the best methods of accelerating our turnaround."

Under pressure for more than two years with slowing sales and a plunging stock price, former chief executive Philip J. Schoonover left Circuit City less than a month ago, and vice chairman James A. Marcum was named acting president and CEO. In July an attempt to merge Circuit City with Blockbuster collapsed, putting additional pressure on Circuit City. Also in September, former leaf tobacco firm executive Allen B. King was named to head the retailer's board of directors.

Best Buy has been placing an emphasis on mobile phones and laptops following the success of its partnership with the United Kingdom's Carphone Warehouse. The partnership last week said it planned to build 100 big-box Best Buy Europe stores, as well as smaller Wireless World stores, which will specialize in marketing cell phones and other mobile devices.

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