Circuit City, the world's second-largest electronics retailer announced on Friday that it has been forced into liquidation after attempts to sell itself to a third-party failed.
Circuit City's liquidation is sad, but it shouldn't come as a surprise. The company has been facing serious financial issues for the past few years and was delisted from the New York Stock Exchange after filing for bankruptcy and witnessing its stock price plummet to near worthlessness. Moreover, the economic crisis had a severe impact on Circuit City, and fewer creditors were willing to offer the company attractive rates as it tried to purchase goods for sale.
But it wasn't always like this for Circuit City. The company once enjoyed great success, and it can trace its roots all the way back to 1949.
In 1949, Samuel Wurtzel, a resident of Richmond, Va., opened Ward's--his hometown's first television store. Ward's quickly gained popularity in Virginia, and Wurtzel started branching out and acquiring similar stores all over the United States.
During the 1970s and 1980s, Wurtzel experimented with different store ideas to see which consumers appreciated most. After a few false starts, he found that consumers appreciated "big box" retailers and the name "Circuit City." Because of that, he renamed his empire "Circuit City Superstores" and went national.
In 1984, Ward's officially became known as Circuit City and went public on the New York Stock Exchange. At first, the stock was relatively small, and few people knew if the company would be a success. But when Circuit City acquired Lafayette Radio in 1991, the company finally made its way to the heart of the business world--New York.
For the next 10 years, Circuit City would enjoy unparalleled success in the brick-and-mortar retail business, and with a soaring stock price during the tech boom, it seemed that the world's largest electronics retailer would enjoy success for years to come.
But once the dot-com bubble burst and shareholders started to lose confidence in the vitality of the tech sector, Circuit City found itself trying to fend off Web giants such as Amazon.com, as well as a direct competitor, Best Buy.
Failing to do so, Circuit City was forced to lay off employees in 2003 in an attempt to reduce expenses, and change its strategy to compete with Best Buy and online giants that were undercutting its price and providing a more customer-friendly experience.
In 2005, Circuit City executives were losing the respect of the shareholders, and a hedge fund named Highfields Capital charged the executives with not doing enough to maximize shareholder value. The fund offered to acquire the retailer for $17 per share, but the offer was rejected by the board later that year.
Although Circuit City was sitting on about $1 billion in cash when it rebuffed the offer, the end was near. Best Buy was enjoying unprecedented success, and Circuit City was knocked off the top spot in electronics retail.
In 2007, just as it seemed that things couldn't get worse, Circuit City witnessed unprecedented senior management turnover, which indirectly led to the company's decision in March of that year to lay off 3,400 employees to reduce expenses and re-examine its strategy.
It didn't work. Circuit City sales were declining at an even more rapid rate, and creditors started losing faith in the retailer. The end was near.
In April 2008, Blockbuster, another ailing company, announced a bid to acquire Circuit City for $1 billion. Upon engaging in due diligence and examining the logic behind such an acquisition, Blockbuster rescinded its offer in July 2008, claiming that market conditions wouldn't warrant such a maneuver.
Just two months ago, in November 2008, Circuit City announced that it was forced to file bankruptcy, and its stock price plummeted to a mere 2 cents per share. Company executives claimed that if the company could get through the holiday shopping season with strong sales, they might be able to salvage the business.
That didn't happen.
And now, as we sit here on the eve of Circuit City's 60th birthday, the company is being liquidated. I can't say that it surprised me--Circuit City has, for years, endured through tough times and poor management, and I'm actually somewhat amazed that it lasted this long.
Was it poor management that killed the company? That always plays a part. But more than anything, I think that Circuit City has met its demise today because, in my experience, it never offered the customer service that Best Buy did, nor the cheap prices one could find on Amazon. Suffice it to say that Circuit City was the also-ran in an industry where holding that moniker usually leads to financial ruin.
Am I sad to see Circuit City go? No. In my mind, it had become a derivative retailer chain that provided little value to the consumer. But I am sad today to see that 30,000 of its employees, many of whom entrusted their job security to management, will be without jobs. It wasn't their faul,t and yet they're being forced to bear the brunt of past mistakes. We can hope that they land on their feet.
As for Circuit City, there's not much left to say. It enjoyed a long life, and for a while, it led the way in electronics retail. But as its age started to show, and management failed to adapt, new and more nimble companies made their way to the front of the pack. Sadly, all that will be remembered of Circuit City are the mistakes its executives made that led to its ruin.
Goodbye, Circuit City.