Circuit City Closing 20% of Stores Because Of Business Woes

Due to the economy, bad business decisions and increased competition from Best Buy, Circuit City is closing 20% of its stores nationwide.

The move comes as Circuit City heads into a crucial holiday shopping season that could determine its future, amid a slowdown in consumer spending that has even the least vulnerable retailers worried.

“The weakened environment has resulted in a slowdown of consumer spending, further impacting our business as well as the business of our vendors,” James A. Marcum, vice chairman and acting chief executive said in a statement. “The combination of these trends has strained severely our working capital and liquidity.”

Mr. Marcum called the decision to close stores “difficult, but necessary.”

Circuit City has had only one profitable quarter in the last year, posting a wider second-quarter loss in September with a 13 percent decline in sales at stores open at least a year. Its results have weakened as the company faces significant declines in traffic, heightened competition from a rival,Best Buy, and others and a weakened brand position.

The company, which is reviewing its operations while exploring strategic alternatives, has been working with advisers to determine how to substantially improve its operating and financial performance.

It is completely leaving certain markets, including Atlanta and Phoenix, but the New York metro area will be largely intact. Only two stores are being shuttered in New Jersey - Freehold and Livingston, while New York loses eight stores, including outlets in Palisades Center Mall, four locations in New York City, and several on Long Island.

The full list is here.

Circuit City's stock may also face delisting from the NYSE if it cannot get its share price above the listing minimums. The stock has an average closing price of less than $1 over 30 consecutive trading days, which spells real trouble for the company going forward to raise capital.