Circuit City Restructures, to Close Stores and DC

Circuit City Stores, Inc. (Richmond, Va.) expects to close seven domestic “superstores” by the end of February. The stores generated $71 million in revenue during the twelve months ended December 31, 2006. The stores reportedly are cash-flow negative or are very low-volume, low-cash flow stores with older formats that are being closed for brand image reasons.

The company also plans to close a distribution center in Louisville, Ky, that is used primarily for store fixtures and signage. A separate distribution facility in Louisville that is primarily used to distribute entertainment software is not impacted by this closure.

"Because of the intensified gross margin pressures that we saw in the third quarter within the flat panel television category, we launched efforts to accelerate the timing of planned initiatives to improve sales and gross margin, as well as improve the efficiency of our expense structure," said Philip Schoonover, chairman, president and CEO.

The company’s international segment will close 62 under-performing company-owned stores and return 92 Rogers Plus stores to Rogers Wireless Inc. This will allow the segment to eliminate one region and four districts.

Circuit City’s finance executives expect to incur pretax expenses in its fiscal 2007 fourth quarter of $30 million related to the store and other facility closings; $40 million to $60 million related to goodwill impairment; and $15 million related to other restructuring activities.

"I believe that world-class multi-channel retailers need to offer a seamless experience to their customers. As such, we have taken steps to fundamentally re-align our businesses,” said Schoonover. “To increase speed and limit bureaucracy, we have restructured key business teams and cross-functional structures that are responsible for the day-to-day operations of the company as well as support our longer-term strategic direction. We also have reshaped the larger organization, bringing all retail channels under one leader and all merchandising, services and marketing efforts under another. We believe these actions will help our associates to offer the seamless experience that our customers desire.”

Circuit City Stores operates 643 Superstores and 12 other locations in 158 U.S. markets. Its international segment operates through more than 800 retail stores and dealer outlets in Canada.

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