When Circuit City announced on Monday that it was closing 155 stores amid financial trouble, it didn't surprise me at all. If you've been following this page over the past year and a half, you know that I've been saying since the beginning that Circuit City doesn't have the chops to stick around and compete with Best Buy.
(Credit: Circuit City)
And although yesterday's announcement was probably a shock to some at the company, it shouldn't have been. For the past few years, Circuit City has been the victim of one of the steepest declines this industry has ever seen.
Right now, the stock is in danger of being delisted from the New York Stock Exchange, thanks to a share price that can't make its way above the $1 mark. In fact, even after announcing the closure of 155 stores, the company's shares rose only 10 cents in daytime trading, bringing its stock price to 36 cents per share.
We can't forget, upon analyzing Circuit City, that this isn't the end of store closures, nor the beginning of financial success. The company is now going to engage landlords in negotiations to "aggressively" reduce rental rates in stores nationwide.
Once that initiative fails--and it will--Circuit City will have no other option but to close even more stores as it tries to find the right balance between size and financial stability.
To make matters worse, it will be delisted from the NYSE. I simply don't see any way the stock price can gain almost 70 cents in a short amount of time to get regulators off the company's back. And once that happens, any influx of cash Circuit City was hoping for will be lost, and it will be forced to close even more stores.
The end is near for Circuit City. Its decision to close 155 stores was an opening salvo in the hopes that shareholders would take notice and believe the company had the ability to turn things around.
Unfortunately for Circuit City, the shareholders didn't fall for it.
The company may be an attractive target for at least one company in the industry. After all, CompUSA was picked up by TigerDirect, and now some CompUSA stores are open in Florida.
But then again, maybe Circuit City isn't as attractive to acquiring companies as it wants to believe. Maybe companies realize that Circuit City is a dog and will never be able to compete with Best Buy in brick-and-mortar stores or Amazon.com online. Maybe they realize that with a stock that's in serious danger of being delisted, it has no hope of repairing shareholder confidence. And maybe they realize that Circuit City's days are numbered, regardless of the amount of cost cutting and expense slashing in which the company engages.
I've said it once, and I'll say it again: Circuit City is a dying company with no viability to, well, anyone. With Best Buy and online retailers squeezing it out of the market, I honestly don't believe that Circuit City will be around even a year from now. Strapped for cash, facing an avalanche of competition, and in desperate need of solid revenue, Circuit City looks like company that simply can't survive in today's hotly contested environment.
The game is over. And Circuit City lost.