Circuit City execs killed the company
Why is it so hard for everyone discussing Circuit City's Chapter 11 filing and New York Stock Exchange stock suspension to tell the world what really happened with this company?
No, Circuit City isn't dying because of the credit crunch, and there's no way we can blame its demise on the preferential treatment competitors like Best Buy are receiving. And we certainly can't blame it on the online-retail industry.
For some reason, every story I see written about the topic gives the company line--Circuit City is forced to file for Chapter 11 protection because of the "tight credit market"--and yet no one tells it like it really is: Circuit City is dying today, and will be a mere memory in just a few short months, because the company's executives ran the business into the ground.
Some believe that with the online onslaught being what it is, there's really only room for one major electronics retailer in the brick-and-mortar space. Anyone who believes that has no grip on reality.
There is room for multiple big-box electronics retailers. If Circuit City executives established a business model that competed with Best Buy's instead of trying to copy it, none of this would have ever happened, and we would be wondering which retailer will have the better holiday shopping season.
Instead, we're digging Circuit City's hole.
There's no debating that Circuit City is subject to the economic downturn; every company is feeling the crunch. But we don't see every other retailer closing stores and laying off thousands of employees because of a "credit crunch." The way I see it, Best Buy is largely insulated from much of these troubles because its executives established a business model that helps it maintain stability. Circuit City executives were too busy ruining the company to figure out how to fix it.
"Over the past several months, consumers have been unable to borrow funds through credit cards, let alone home equity loans, to purchase household and other electronics products," Bruce Besanko, Circuit City's chief financial officer, said in a court filing. "Without immediate relief, the company is concerned that it will not receive goods for Black Friday and the upcoming holiday season."
Wow. Does anyone else find that statement alarming? It's as if Circuit City's executives are playing with dynamite. Can someone explain to me how home equity loans come into the equation when discussing the consumer's unwillingness to buy electronics?
Ostensibly, Besanko is trying to make the point that consumers can't afford their homes, so their desire to buy electronics is diminished. But if Besanko looked at recent filings from Amazon.com and Best Buy, he would know that, yes, consumers still are buying electronics; they're just not doing it at Circuit City.
Even more alarming in that statement is Besanko's comment that the company is concerned it won't be able to get "goods." Are you kidding me? Doesn't Besanko and the rest of his cohorts understand the gravity of not having goods in stores and ready for shoppers a mere three weeks before heavy shopping starts? Call me crazy, but I'm willing to bet that Best Buy is good to go with its Black Friday "goods."
Perhaps the most alarming example of executive misjudgment is shown in the incredible decline in shareholder value and stock price. On April 7, 2000, Circuit City's stock price was hovering at about $58 per share, and the company was issuing dividends to shareholders. Today, Circuit City's stock has been suspended by the NYSE.
During its 2005 fiscal year, Circuit City turned a profit of about $61 million. During its last reported quarter, the company lost $239.17 million. But it gets worse: the company's net change in cash--a good indicator of executive management--amounted to a loss of $512 million over the past four years. For a company of that size and magnitude facing the kind of issues it faced, that's simply unacceptable.
Knowing that Circuit City's executives over the past eight years have single-handedly ruined any prospect for growth, thanks to questionable decisions and poor management of company assets, the current team of executives wants to blame everyone else but themselves.
The numbers and the financial data speak for themselves; the only reason Circuit City is in ruin today is because of the company's executives. After all, Best Buy is competing in the same environment, and that company has performed extremely well. Why couldn't the sector's most prominent company from years ago have done the same?
It's unfortunate, but there's no saving Circuit City now. The game is over, and the retailer has lost. Now the time it has left can be counted in days and weeks, rather than months.
If I had to make a prediction, I'd say Circuit City will liquidate all assets by the end of the year.
Check out Don's Digital Home podcast, Twitter feed, and FriendFeed.
Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
I think that was the single dumbest move CC ever made on its odyssey to reorganization. Fire your most knowledgeable and loyal employees...then hire greenhorns at half the hourly rate to replace them. Way to go, Circuit City!
I hate to sound cruel, but I mean really, that's the situation most retailers have to face these days. There are plenty of knowledgeable, valuable employees that lost their jobs, yes, but that doesn't mean they all were and that doesn't mean they've somehow brought about the downfall of the company. As an employee, you have to stay competitive and prove your worth, and the same could be said for your employer.
This reporter doesn't have a clue as to what is happening in the world. PEAK CREDIT is the reason C.C. is failing and guess what? Best Buy's failure is just around the corner. Wake up reporter, we are all going down this path. Consumerism is dead. We will only be buying what we absolutely have to have.
And in answer to your question, since you don't know it. The stuff that Circuit City has been selling (Big Screen TV's and so on) have been paid for by the refinancing of Real Estate Bubble Housing prices. Plain and simple. There's no more income to be had from the price of homes going up. The income level of America has been stagnant for over a decade, only through home loans have folks been able to afford C.C. stuff. Same goes for Furniture and Lowes etc. Only what's needed will be bought. If you are in a business that sells stuff that isn't really needed, you might want to look for new work. At the very least, don't spend the money you now have on things you don't need, even if they are discounted at Circuit City's Bankruptcy sales. Don't take the bait.
I used to work at BB, but i'm by no means biased in my opinion, i used to buy all my electronics at CC back when they actually had stores in my area. But the fact of the matter is this, rather than trying to come up w/ new business models, around 3-4 years ago CC was canning its managers at stores, and bringing on former BB managers for lucrative amounts of money. We're they trying to change their business...yes, credit to them. But how were they trying to do it? BY COPYING BEST BUY. this is the exact opposite of how they should have tackled the situation. Rather than moving towards the future, they were busy copying what worked yesterday. dumb dumb dumb.
Gee, I'm an idiot. Less than 24 hours after my prediction on my post that Best Buy is next. The No. 1 U.S. electronics chain, slashed its fiscal 2009 profit forecast on Wednesday, driven by weak consumer spending heading into the crucial holiday selling season. Wait until the next quarter's report. It won't be long now. Like I said. The stuff that they sell isn't needed. How many Big Screen TV's do you think will sell during a Depression? If you think Obama is the answer, then you are blind. Obama thinks that bailing out GM and Ford will help. Hey why not Circuit City?? After all it's simply poor management like the Big Banks. WRONG! It's the end of Credit! The end of credit means the end of Americans buying things, because that's the only way they've known.
If you have highly-paid sales staff that aren't good at it, guess who's fault that is?
I've never worked at CC, and once they dumped the staff I refused to shop there. Sorry guys, but I don't reward morons.
gave CC. almost 10 years, I ran customer service not the managers, their most important job for the day was what
they should have for breakfast, lunch and dinner, while I dealt with all the customer service issues, sometimes
I would be on the phone troubleshooting for customers for more than an hour and at the same time ringing up
customers while I was on hold. Some customers would come in only on the days I worked because they knew
I would get the job done. Most of the employees that got fired with me could run the store. Some of the managers
were very young and some would drink on the job with other associates. But thats what CC wanted, and guess
what going bankrupt is what they deserved and got. I haven't shopped at CC and never will again. So long CC.
I'm perfectly willing to consider your premise--and I have no dog in this fight--but some kind of backup anecdotes, procedures, decisions, etc. needs to be provided. I kept waiting for some analysis of CC's failed business model or actions to be presented, but came away with nothing.
Writing under the tagline: "Don Reisinger's take on tech closest to home" and yet you guy somehow figure out that it is an opinion piece.
Bravo.
If you have been paying attention, you wouldn't need Don to tell you all the missteps they have made.
1. Firing commissioned well informed employees
2, Hiring inexperienced employees
3, Not properly training new employees
4. No incentive for good employees
5, No espirit de corps "Can Do." attitutude, morale training
6. Continued expansion of stores even though there was an obvious downturn in sales
7. Not controlling perks for senior management Two (2) company owned jets.
8. Lucrative bonuses even though the company was not making $
9. Voting themselves Golden Parachutes for themselves when they Knew they were failing.
10. Not taking advantage of a possible purchase by Blockbuster Video
Do you need more, let me know.
They are all a waste of oxygen.
A: Everyone who cant or dont desire to research what they need. Which isn't "us" (CNET forum posters).
I waited 10 minutes... standing and looking expectantly at the new salesman as he helped someone else--I don't mind waiting my turn--and when he was done, he just walked over to another section, completely ignoring me.
Now, their bankrupcy means there are two reasons that I'll never visit a Circuit City again
Sure, market dynamics come into play, but it's the executives' responsibility to anticipate market challenges and make the right decisions to keep the company healthy and thriving. Even all of the banks and financial institutions I'd argue are not failing because of the credit crunch and housing bubble, although they're certainly factors. I'd argue they're failing because leadership made bad decisions on risky assets.
-
by ernestom2008
November 11, 2008 3:56 PM PST
- I agree with the writer of this article, I stopped buying at CC many years ago. The last time that I was there I was looking for an HDMI cable for my dvd player. They only had some very expensive cables which I ended up buying from a website on the internet for much cheaper and probably better quality. The store is really run down and in general you cannot find anyone to help you. I asked about a cellphone and the guy really didn't know much. These guys are only order takers, they are not sales persons. It was obvious that they didn't get paid very well. And it's not only CC, I recently went shopping for soccer shorts at Academy, a major outdoor and sporing goods retailer in this area. I walked in and was overwhelmed by the size of the store. After looking for the shorts for about 10 minutes not finding any employees on the floor, I finally found two kids who worked there, they were coming out of the back room going somewhere, I stopped them and loudly said "does anyone work here?" They were not apologetic or anything, just didn't really seem to care. One of them called another employee who supposedly worked in the apparel area, she arrived, was very helpful but it was obvious that she really wasn't sure where the shorts were. I finally found what I was looking for but the experience left me with a bad taste regarding this store. Will it survive the bad economy?
-
Reply to this comment
-
-
-
by chezbrgr
November 12, 2008 3:52 AM PST
- "The last time that I was there I was looking for an HDMI cable for my dvd player. They only had some very expensive cables which I ended up buying from a website on the internet for much cheaper and probably better quality."
-
-
-
by thealmightymonky
November 12, 2008 10:08 AM PST
- "I stopped them and loudly said 'does anyone work here?' " --so you made a rude sarcastic comment in an attempt to get help and the employees were less then pleasant in response? Shocking.
-
-
Showing 1 of 2 pages (60 Comments)I blame the store management for not hiring employees who care, paying them a decent wage and giving them the best training and motivation.
But this story is not unique to the US retailing industry, I left a company which is in an industry that in general is doing well. One of the main reasons that I left is due to the poor management that runs the company. They are bleeding their best employees and bringing new managers from the outside instead of making an effort to promote from within.
This problem with poor management in US companies is a disease all over corporate America. Until this disease is brought under control it will continue and companies will continue to fail. And yes, the bad economy is a big factor in the failure of companies at this time, but if management would prepare for these times instead of worrying about their big paychecks and bonuses and the short term profits of the company, then they would be in a better position to survive these times.
That speaks volumes of why there is also troubles, you probably chose not to buy the Monster cables cause they were 50 or 60 bucks and came with a lifetime guarantee from a good company, with a long track record. No you would rather have the 15 dollar one from the internet that everyone says is just as good! Think about that next time you pass your local grocy store, to go to Walmart to save 1.16 on Soda!
It's things like this that killed the buisness as well as corparate misteps.