Circuit City said Monday that it has filed for Chapter 11 bankruptcy and that the company plans to operate its business without interruption.
Circuit City, the second largest electronics retailer behind Best Buy, has been thumped by its bigger rival and stores such as Wal-Mart. The company said it has lined up $1.1 billion in debtor-in-possession financing so it can pay employees and keep the business running.
Circuit City recently announced that it was taking certain actions to address the company's financial condition and deteriorating liquidity position. Despite aggressive efforts to secure vendor support, vendor concerns about the company's liquidity and ability to pay for its purchases in this difficult economic climate have escalated considerably since the company provided a liquidity update on November 3, 2008, further impairing the company's ability to conduct business and provide service to its customers. Faced with the need to secure ongoing vendor support and to ensure adequate merchandise flow to stores during the important holiday season, the company has determined that it would be in the best interest of its stakeholders to file for reorganization relief under Chapter 11.
In Chapter 11, Circuit City will continue its reorganization, ditch leases and ultimately wind up with a chain of about 566 stores. Given the Circuit City move you can expect Best Buy to gain more share in the brick-and-mortar world.
A look at the 3-year chart:
And in the "some of the best move are the ones you don't make department," there's a collective sigh of relief from Blockbuster. Just a few months ago, the movie rental chain wanted to buy Circuit City, but came to its senses.