UFCW 324 Communications / News
Layoffs Lift Circuit City
March 28, 2007 · Wire Services
Circuit City announced Wednesday that it plans to cut its workforce and look into a sale of its Canadian unit InterTAN.
Shares of Circuit City were up 51 cents, or 2.7%, to $19.43, after the company said Wednesday that it would fire around 3,400 employees. Although the company will rehire new workers for the positions, they will be compensated at a lower wage.
The company also said it will also explore strategic alternatives for InterTAN, including a possible sale. InterTAN is a Canadian electronics retailer that Circuit City purchased in 2004. The company has retained Goldman Sachs as an advisor.
Circuit City has sorely needed a fresh course since increasing competition from discount retailers like Wal Mart started pressuring sales. The company also has been unable to please customers like rival Best Buy. Circuit City ranked at the bottom of its category on the University Michigan's American Customer Satisfaction Index this year with a 69 while Best Buy tallied a 76.
Shares of Circuit City fell as those concerns mounted. The company has tumbled around 37% since trading more than $31 in June 2006.
Investors had also been concerned that a turnaround might be faltering. The departure of chief financial officer Michael Foss in February followed flights by other executives and worried some analysts the turnover would sap strategic focus.
But Circuit City said it expects that moves announced Wednesday, along with store closures announced Feb. 8, to significantly reduce its selling, general and administrative expenses. The company estimated savings of approximately $110 million in 2008 and at least $140 million in 2009 and after.