Tag Archives: New York Stock Exchange

One Foot In The Grave At Circuit City

With just three weeks to go before most of the nation’s retailers enter their busiest time of the year, Circuit City stores have announced their latest brilliant plan. They are closing 155 of their locations, spread across 28 states (Reuters and Associated Press, 11/03/2008). The going-out-of-business sales at these locations will reportedly start tomorrow, November 5th. This is the latest bit of bad news from the nation’s #2 electronics retailer, which has had mass layoffs, sales declines, and received a lot of negative publicity in the last few years (see our previous articles about Circuit City’s problems, here, here, here and here).  With the closing of these Circuit City locations, thousands more Circuit City employees will join the ranks of the unemployed.

This should be viewed as an emergency amputation, as opposed to a pruning. When you have a healthy core, but too much growth in the branches, you prune, to keep the rest healthy. When there is systemic disease that causes necrosis at the periphery, you amputate. Other large retailers that have been proactive in difficult times tend to close just a handful of their worst performing locations, and they’ll do it after their peak selling season. Retailers that make ill-timed cuts, and who do it with an ax instead of a scalpel, tend to suffer from poor management or a lack of management. They usually don’t act until it’s too late. We believe the current debridement occuring at Circuit City falls into this category.

The fact that Circuit City could not wait until after the holiday selling season to close these stores speaks volumes about just how bad things are at the Richmond, Virginia-based electronics retailer. Indeed, with a stock price that has traded as low as 17 cents a share in recent days, and notification last week from the New York Stock Exchange that their stock is subject to de-listing, things can’t get much worse. Some of their suppliers, fearing that Circuit City is on the verge of bankruptcy, are refusing to ship merchandise to Circuit City unless they are paid cash up front. Consumers, hard hit by the recession, and disgusted with Circuit City, are spending any money they may have, elsewhere. Even with the announced closings, some analysts are predicting that Circuit City will be forced to liquidate or file for bankruptcy by January.

As bleak as things are at Circuit City, you still hear people saying that they are exploring “strategic alternatives” (see Business Week, 11/03/2008). We will submit to you that when you’re on the verge of bankruptcy, sales have dried up, vendors are demanding cash, your stock price is measured in pennies rather than dollars, you’re forced to close hundreds of stores, and the nation is in the grip of a deepening recession, you don’t have any “strategic” alternatives. The choices seem to be declaring bankruptcy now, or trying to hang on a little longer and declaring bankruptcy a few months from now. If Circuit City is pinning their hopes for survival on having a banner Christmas season, they’re in for a terrible shock. Even relatively healthy retailers are bracing for a dismal end to a dismal year, and the U.S. economy doesn’t seem poised to roar back to life anytime soon.

Circuit City’s woes spell opportunity for it’s competitors. It appears that the nation’s largest electronics retailer, Best Buy, will likely snap up some of the locations being vacated by rival Circuit City.

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When We Speak, Wall Street Listens.

One of the great things about hosting a blog at WordPress.com is the various tools and statistics they provide (thanks, Matt). You can see how much traffic your posts attract, how your visitors are finding your blog, what search terms people are using to find you (but sadly, not which search engine they used), and what hyperlinks in your posts they click on.

We were quite surprised this morning, when we noticed that nasdaq.com was sending traffic our way because of this article we posted yesterday about the U.S. economy. We had mentioned that New York and New Jersey utilities, including Consolidated Edison, had recently gotten steep rate increases approved by regulators, some as much as 25% and 50%.

Within a few hours, visitors to Nasdaq who looked up Consolidated Edison (NYSE: ED), were seeing a link to our blog in the “Comments From The Blogs” section on nasdaq.com. This is yet another example of how blogging has really gained legitimacy, and how mainstream media and even Wall Street have taken notice of what is being discussed by bloggers. To be sure, it is a bit of a trip, realizing that almost anyone with a computer and Internet access can have their voice heard by the world. To us, that’s perhaps the greatest thing about this experiment they call the Internet. It transcends borders (although some regimes try to surpress it), it makes the world a very small place, and it gives you access to views and opinions you would otherwise never hear. How great is that?

Now that Routing By Rumor is (almost) a household name, we want to let the New York Stock Exchange know that we are available, should Dick Grasso’s old job still be open. However, in light of the firestorm that his $140 million retirement package caused, we want to go on record as saying that we will not accept a deferred compensation package of more than $75 million. We think that even Eliot Spitzer, the former New York State Attorney General turned New York Governor (and no friend of Dick Grasso’s), who’s career crashed and burned in a sex scandal, would approve of that.

– Routing By Rumor

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