Circuit City Stores Inc., unable to work out a sale of the company after filing for bankruptcy protection, said Friday it will go out of business — closing its 567 U.S. stores and cutting 30,000 jobs.
The nation's second-biggest consumer electronics retailer is the latest casualty of an unprecedented pullback in consumer spending that has driven other brands such as KB Toys, Mervyns LLC and Linens 'N Things into bankruptcy.
The closures would affect four remaining Circuit City stores in Middle Tennessee, located in Bellevue, Clarksville, Cool Springs and Madison.
"This is the only possible path for our company," Circuit City's acting Chief Executive James A. Marcum said in a statement. "We are extremely disappointed by this outcome."
The company had been seeking a buyer or a deal to refinance its debt, but the hobbled credit market and consumer worries proved insurmountable. Negotiations for an acquisition went past midnight on Thursday, Circuit City lawyer Gregg Galardi said in court.
Two buyers — Mexican billionaire Ricardo Salinas Pliego, who controls a chain of electronics stores in Latin America, and the Golden Gate Capital private equity firm — had been looking to buy the company in a shrunken form, with either 350 stores or as few as 180 stores. But Circuit City could not secure the necessary financing or support from vendors.
Shareholders are likely to receive nothing, as is typical in bankruptcy cases. Circuit City said in court papers it has appointed Great American Group LLC, Hudson Capital Partners LLC, SB Capital Group LLC and Tiger Capital Group LLC as liquidators. They will pay a 70.5 percent return on merchandise.
It wasn't clear what would happen to the company's 765 retail stores and dealer outlets in Canada. Galardi told a judge there are still bids for the Canadian business.
Best Buy should benefitCredit Suisse analyst Gary Balter told investors that Circuit City's demise will help Best Buy cement its position as the market leader.
"Losing Circuit (City) and what had previously been an $11 billion business, in addition to share gains from other smaller outlets, should help to partially offset weaker consumer spending as well as further secure Best Buy's position as the leader in the space," he said.
Shares of Best Buy Co. rose $2.44, or nearly 9 percent, to $29.58 in afternoon trading.
The liquidation of Circuit City follows the worst holiday shopping season in four decades.
Circuit City filed for Chapter 11 in November as vendors started to restrict the flow of merchandise ahead of the busy holiday shopping season. At that time, the retailer said it would close stores in Antioch, Spring Hill, Collierville and Memphis.
It had been exploring its options since May, when it opened its books to Blockbuster Inc. The Dallas-based movie-rental chain made a takeover bid of more than $1 billion with plans to create a chain to sell electronics gadgets and rent movies and games. Blockbuster withdrew the bid in July.
Circuit City, under court protection, had already broken 150 leases at locations where it no longer operates stores and closed 155 stores in the U.S. in November and December.
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