Is Circuit City dead?

After visiting both Best Buy and Circuit City this weekend, I was floored by the incredible differences between both stores: Best Buy was packed, Circuit City was begging people to come in; Best Buy was making sales every few seconds, Circuit City had one register open and no one in line. Thinking this must have been an anomaly, I did some research on both of the companies' financials and came to a staggering conclusion: Circuit City is dead in the water.

Sure, some may say that my assertion that Circuit City is dead may be a bit premature considering the fact the company has enjoyed growing revenue with last year's figure amounting to almost $12.5 billion, but for the first time in three years, Circuit City incurred a loss of $8 million -- a sharp contrast from its 2006 profit of $139 million.

But Circuit City's problems go far beyond its financials. Much like CompUSA, it's a company that is plagued with poor leadership and a host of issues that its management simply can't fix. And to make matters worse, the same two forces that killed CompUSA -- the online world and Best Buy -- have Circuit City in their sights now and things don't look good.

Trust me -- it's all over for Circuit City.

If you still don't believe me, let's simply compare numbers. As it stands, Best Buy's stock price is hovering at about $40-$42, while Circuit City's is just $4 per share. As I mentioned, Circuit City lost about $8 million in 2007 and Best Buy incurred a profit of $1.377 billion. Best Buy increased its cash coffers by about $457 million, allowing it to invest in even more profitable enterprises, while Circuit City's was reduced by $174 million.

As if that wasn't enough, Circuit City's market cap is just $680 million. Compare that to Best Buy's $17.26 billion and you quickly learn everything you need to know about two of the largest big-box electronics retailers in the world.

But it gets worse. In its latest quarter alone, Circuit City incurred a loss of $207 million with revenue of just $3 billion. On the other hand, Best Buy enjoyed revenue of about $10 billion with a net income of $228 million.

Taking all of those figures together, it's not difficult to see that the end is near for Circuit City. But how close is it? According to the company's board, it will continue to do all it can to keep it afloat, but I simply don't see how that's possible. To make matters worse, it's not even a target for acquisition because Best Buy stores can usually be found anywhere a Circuit City store is and very few companies are willing to get in on the big-box electronics retail game anymore.

In essence, Circuit City is on its own.

And although some may say that it'll be a sad day when Circuit City finally follows CompUSA down the path of obscurity, I don't agree. To be quite honest, Circuit City is nothing more than a major retailer with only some of the products you're looking for at prices that aren't nearly as competitive as those online or even at Best Buy. In other words, I don't see any value in shopping at Circuit City.

And unfortunately for Circuit City, the majority of the population finds no value in shopping there either.

But alas, Circuit City may be around for longer than you think. As it stands, it still has a relatively stable financial structure and has been successful in keeping debt at a manageable level. That said, it's losing cash at an astounding rate and its stock price has no chance of rising to any level that would help it turn things around. And if it's losing money at a such a fast rate and it can't raise cash through stock ventures, it has but one option to turn things around -- borrow.

Circuit City is nothing more than a floundering enterprise that is trying to do all it can to stay relevant. And while I believe the chances of that happening are slim, the company still hangs on to a faulty belief that it has a chance at becoming a major player in the electronics retail industry.

I can't blame the executives for trying, but trust me, it's over.

[saks]

Who is this chump and why is CNet letting him write financial opinion? It was bad enough when the idiot wrote an entire article blaming the FCC for delaying the Sirius-XM merger (when FCC was actually deferring until the completion of DOJ's and FTC's competition review), now we have to hear him recount Circuit City's latest earnings report - and poorly at that. What he doesn't say about Circuit City is that management is almost certainly going to change in the next 6 to 12 months, they are coming off a year of disappointing results in part because their last turnaround plan backfired, and there's a decent chance they'll revitalize earnings (or get sold) in the coming 2 years. Short money operators like the hedge funds stepping into CC's stock don't buy losing causes if they can help it. They're not interested in putting money into a company on the verge of bankruptcy, they're interested in putting money into a company trading below its value with potential for a substantial turnaround.

I can't blame Don for trying, but don't let him write any more business pieces - let him stick to the fluff pieces he's so mediocre at already. I mean, great that you call everyone an editor at CNET, but maybe its time for someone to actually do some EDITING.

[Stevhov1]

I think Don's opinion on the state of Circuit City's is well laid out, and quite valid. I'm sure it is unfortunate that he disagrees with you, but his opinion piece was well supported with easily verifiable facts, and free of emotional rhetoric and personal attacks....unlike your response. :)

[ssherez]

've heard that CNET is also in trouble. "Dissident shareholders belittled CNet Networks Inc.'s leadership as incompetent and lackadaisical in its latest efforts to steer the slumping technology news and entertainment company in a new direction. "People in glass houses shouldn't throw stones".

[Composer_1777]

Do you even know what hedging is? I wonder why you think your such an authority on investor opinions; why don't you tell us your anaylization of CC finances? Hedge funds have little to do with stock, but if you insist on bringing it up to seem smart, lets take a look at what an actual person ingaged in hedging would do. Well first they would look at the ROE and well as this guy points out that it looks bad. A company that would turn around and make profit would be exhibiting some sort of Positive ROE. Another thing, hmm, would they actually buy the stock well they can use the CAPM to determine if it is, in fact, under valued. finaly they can consider the P/E ratio, to make a bid or offer on the stock.

[thepoetrydude]

I worked at compusa, and I've got friends at circuit city. it's going down the same path. Not to mention that at circuit if you start making too much money as an employee, your out.

[aubrey_q]

I hope Circuit City makes a turn for the better because competition is always good for the consumer. I can't imagine just having Best Buy and nothing else.

[butler360]

YES, they are dead. And I hope it sends a clear message to any employer thinking of trimming the top 3,800 employees for making too much money.

[lonny paul]

While the former CompUSA may have had trouble, perhaps including the reasons discussed herein: The new website, 16 of the best stores in the country, and the name live on -- there is plenty of hope for the All-New CompUSA to serve as an example to others.

If you do a Google blog search for CompUSA and look back a week or so, you'll find several posts regarding visits to several stores during their 'soft open,' and people were quite surprised to see that change had already been made in a big way and were quite happy with what they saw. (ie: http://blog.darkdelusions.net/?p=44)

You will find the new stores have a wider selection, better prices and if you happen to live outside of the CompUSA current footprint of Florida, Texas and Puerto Rico - then why not just shop online at home and let CompUSA bring it to you?

In respect of full disclosure: I am the Director of eCommerce for CompUSA, now a member of the Systemax family of companies.

[aubrey_q]

Mr. Paul, I appreciate the CompUSA plug but next time you should link something more solid than a weak blog entry with poor grammar. The blogger appeared to have more feelings towards Starbucks than CompUSA.

I kind of miss CompUSA because BB and CC don't quite carry the same stuff they used to. I need to drive to Fry's now if I need some real computer stuff, and I'm not too crazy about Fry's.

Best of luck to CompUSA online and the remaining stores.

[yrtsiger]

Circuit City is nothing like comp usa, sorry but it was dumb for them to fire their top associates and they have admitted that and offered every one of them their pay back if their position was still there, Circuit city is a TV store with still decent margin, Comp usa a computer store no margin. they both sold the same items but with different focuses TV > computers. and the management is not the brightest and will probably be fired but circuit city has pleny of money in the bank a new 1.3 billion credit line and is switching stores to a new format The City. they have the money for a switch and The City stores are showing a higher margin already. C net should be ashamed for allowing the quality post on its site, CC is not doing great now, but its not going anywhere.

[mohanman]

Circuit City is the absolute worse. For some reason, they decided to hire the laziest people around. I bought a dvd/gps unit for my car.. had to go back 6 times!!! to get it to work right! I wanted to sue for something.
Adios Circuit City!

[Leria]

You shouldn't blame that on Circuit City. Some of those DVD/GPS things are VERY hard to install on some models of cars, especially non-SUV ones.

[asshatmcpoop]

You should sue your high school English teacher for not teaching you proper punctuation and grammar. If you operate a DVD/GPS player like you nagivate through a simple sentence structure, it's no surprise you had to go back 6 times.

I'll bet you were a real prince to the retail guys, too. Those guys aren't lazy. Their highlight of the day is helping guys like you who don't bother to read the instruction manual.

[marleyview]

Between extremely poor management at Circuit City and front desk/check-out personnel with an attitude, I would agree its only a matter of time. I recently purchased a number of electronic gaming accessories at Circuit City and was very unimpressed. To add insult, I purchased the 'in home Firedog' tech after purchaseing an new LCD TV...I was told it was just like Best Buy's calibration work except $200 less. Well, a Firedog guy came out and used a $27.00 CD (Monster DVD for calibrating an LCD television) for 25 minutes...The same brand new CD (Monster calibration for LCD) is ~$27.00. Needless to say, this was my last venture into a Circuit City....I emailed them to 'constructively advise them how misleading their 'calibration' work was in light of the fact the DVD is self explanatory and simple for a non-tech...they would rather **** off a customer and add another $100 to the sale. This is a 'poster-moment' in the self-destruction of Circuit City.

[Spartan_458]

I personally don't like the way Circuit City does business. I was recently shopping for a computer, and they did not show any information about the computer on the pricetag. I had gone to Best Buy shortly before, and they showed everything I needed, they were very helpful, and the computer was accessable, unlike Circuit City. Also, Circuit City always has seemed like sort of a dark, gloomy store. Best Buy is usually quite well-lit and friendly. Best Buy's prices were also cheaper. Overall, Best Buy is the better store. Sorry Circuit City, but I'm not shopping there any more.

[calereneau]

I've always found Circuit City's employees much more knowledgeable and helpful than Best Buy's pimple-faced teens. I don't go there for CDs or DVDs, but if I need good advice on home theater or other things, I'm totally there.

[iff2mastamatt]

I agree w/ u. I dislike the BBY workers who offer no aid to help shop. CC ones are very helpful and are very nice. Howecer, both BBY, and CC are doing very in my area, mainly because the people here have moe money to spend.

[darkgamerdx0]

i agree.the workers at Circuit city are more professional and educated. A few days ago i went to the computer section of best buy and me and my brother asked if they sold velocity micro gaming pcs. and they do a guy that didnt even work there had to help me cause the employees didnt know what we were talking about

[maxrebo]

I don't shop much at Circuit City (as the nearest one is about an hour away and a Best Buy is 10 minutes away). I did just purchase an Onkyo home theater system from Circuit City a little over a month ago because BB didn't carry it, and the sale price was pretty comparable to many other places. Amazon had it about $30 less, but I didn't want to wait for it really, and wanted to make sure I liked it. Otherwise, many other online retailers (including Crutchfield) were similar priced or more. I did most of my research online, so I didn't require help from the sales rep ... but it sure made it a really easy sale for him! I agree with Spartan_458 with how CC is dark and gloomy. I have always felt kind of weird (and not too compelled) when shopping there.

[Wes#1]

Here we go again... Don looks into his black crystal ball and predicts another death. Blu-ray is dead... Ebay is dead... now Circuit City. Sorry, Don, but they are all alive and kickin'. Personally, I think CC has a long road ahead and much to improve, but let's not make such hasty predictions based on short-term results in this sagging economy. Besides, what's your point?? Should we not shop there because you think they are dying? If you have not noticed, Tweeter is on the ropes, too; should we avoid them as well? I don't care for the new look of CC's stores, but I've found some better buys there than at Best Buy... so I will continue to shop CC.

[greygabe]

I believe that this is a perfect example of the importance of customer service. I have never seen a price or availability difference in the products being sold at the two stores, but the buying experience is miserable at Circuit City. Most employees do not want to be there, which isn't necessarily their fault but rather should be blamed on management. I doubt that people who work at Best Buy are just nicer by birth. The fact that they don't want to be there usually leads to them seeming annoyed about answering questions, taking shortcuts in the workplace, and just overall not being nice to customers. Someone buying a $2000 electronic item is not going to put up with it. I also believe that Circuit City's lack of diversity on both the management and floor levels could be another driving factor. It can't be a coincidence that one of the most diverse and equal rights companies (Best Buy) in America is winning against one of the least diverse and no equal rights companies (Circuit City).

[Jachael]

My experience with Circuit City has always been better than Best Buy. I think there selection, prices, and customer service are way beyond Best Buy. Yeah, Best Buy sometimes has a better deal, sometimes a much better deal, but I'd rather be able to browse without someone following me around the store asking every 60 seconds if I need help. Seriously, if you're looking at movies or games do you want someone asking if you need help so often you want to kick them. I gave up on Best Buys' service long ago and only go if there is a deal I can't resist, like 100 dollars less for something I've been price watching for months. And even then, disaster incurs when when you actually do want help and they don't want to give it to you.

[ksuarez]

The newer Circuit City stores are pleasant and nice. Olders were down right horrible. They better be ready for a competition at least in florida with the newer compusa. I wish the best of luck to the newer Compusa. More competition is always good an at least in the Tampa market competiotion is needed. Best buy is too big and they are certainly not the best buy in many items

[graviz]

I worked for Circuit City for a little over 7 years. 7-10 years ago was when Circuit City was a great company to work for and shop at. Since then it has all been down hill. The problem with Circuit City is they kept coping their competition. This is a great way to win since the competition will always be one step ahead. As far as all their lay offs I think it is a blessing. I've been laid off twice from there (1 when I was on commission and 1 with the "management restructure") both with some nice parting money. Retail sucks you in and many times will not let you change jobs. As much as I liked working 10-12 hour days and good old Black Firday I'm much happier out of retail. I sitll have many people who still work for Circuit City but I think it is time to shoot this dead horse. Anyone who keeps talking about CC making a rebound needs to put their money where their mouth is. Their stock has been hanging around the low $4s. Put all your money into them and make yourself rich!!!! .........Unless of course you agree with me

[Izzorlas]

Lack of competition never helps the consumer, but I just hate shopping at Circuit City. I have had many occasions in which I wanted to buy a CD or DVD and couldn't even find an employee to ring up my purchase! The stores are just set up terribly. Best Buy also has the Reward Zone program - I know you're not really getting much, but at least you're getting something!

[Fuzzylogik]

I have to disagree with a number of things about this article, but I'll stick to one. I've found that Best Buy has been a misnomer for awhile now -- CC frequently has better prices. Neither rarely compare to NewEgg or ZipZoomFly, but that's moot for this argument. When I was looking for a plasma last summer, CC frequently beat out BB, and not by chump change either (100's several times). I think CC needs to turn itself around, but I wouldn't count it out yet.

[Iam-eggman]

i agree w/ Fuzzy. CircuitC. is a little cheaper then bestbuy if you know what your looking for and do the research you can find a better deal then BB.
I do like going to BB to scope things out but, i would never buy any PCs/Laptops or TVs there. You will pay at least 5% more then online.

[Rick Cavaretti]

Circuit City? The company who's overpaid execs decided the 'little people' were making too much and fired thousands, only to replace them with minimum wage labor? I don't reward this behavior, just like I shun companies that dabble in outsourcing. I don't know what they teach in business schools these days, but these short-term profit ideas are going to kill this country in the long run.

[mass18th]

The thing that will save CC is Customer Service. I keep going back not for the better prices on big one time slaes - BB and CC compare to each other when it comes to everyday stuff, awesome ads or better locations, it?s staff always impresses me. For both The Simpsons and Assassins Creed, their staff went in the back to look for the games on release day ? Best Buy acted like I was being a bother and told me to come back the next day or week. As more and more people experience this and talk about it, they will get better service.
And as far as cash registers go, the BB I went to on Saturday had one open, CC had three ? with lines.