Circuit City will close U.S. stores after failing to find buyer

Circuit City Stores Inc. will close its 567 U.S. stores, including five in Hampton Roads, and immediately lay off most of its 34,000 employees, the company announced Friday.

Liquidation sales will begin as early as today as the company moves to shut down by the end of March, Circuit City said in a news release.

The Richmond-based electronics retailer filed for Chapter 11 bankruptcy protection in November in an effort to reorganize its finances and stay in business. Weak holiday sales crippled those plans. U.S. Bankruptcy Judge Kevin Huennekens approved the company's liquidation after it failed to find a buyer.

"We are extremely disappointed by this outcome," said James Marcum, Circuit City's vice chairman and acting president and chief executive officer, in a statement. "Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders."

Four firms specializing in liquidation will begin arriving in stores this weekend to sell off the company's merchandise to pay creditors, Circuit City said.

The retailer has 22 stores in Virginia, including those at Janaf Shopping Center in Norfolk, in the Greenbrier area and on Portsmouth Boulevard in Chesapeake, on South Independence Boulevard in Virginia Beach and in the Oyster Point area of Newport News.

"It's a shocker," said Devon Simpson, an 18-year-old sales associate at the Circuit City in Norfolk. "If it wasn't for me looking at my cell phone and reading the news this morning, I wouldn't have known about it."

Employees knew about the bankruptcy, said Justin Walker, a 20-year-old sales associate at the same store. "We were told... that someone would buy us and everything would be OK."

Managers have provided only limited information, Walker and Simpson said. Neither knew that the company plans to provide employees with 60 days of pay and benefits.

"This was the best job I've ever had," Walker said. "The retail market's so shaky right now that it's going to be a tough situation. I've just got to stay optimistic and pay my rent."

The liquidation ends a 60-year run for Circuit City, which became the nation's second-largest electronics seller.

Samuel S. Wurtzel founded the business in 1949 as Wards Company, selling televisions in Richmond. It grew rapidly in the next three decades. Executives changed the name to Circuit City Stores Inc. in 1984 as it launched its home electronics superstore concept. Sales hit $1 billion three years later. Taking the superstore concept to used-auto retailing, the company launched the CarMax chain in 1993.

But Circuit City began struggling against growing competition from newcomer Best Buy and discount retailers Wal-Mart and Target. After several efforts to reinvent itself, Circuit City tumbled into bankruptcy.

It's "very, very sad," said Alan L. Wurtzel, the founder's son and an executive at the company until 2001. "I feel particularly badly for the people who are employed or until recently were employed."

Wurtzel has said before that Circuit City didn't take the threat of rival Best Buy seriously enough and was too focused on making a profit in the short term instead of building long-term value.

Circuit City had trouble "keeping up with the demands of today's consumers," said Margie Johnson, a national retail expert. Consumers are fragile "and they quickly go to where they're better served."

The company's failure is unfortunate because it brought "some good, competitive spirit to the marketplace," said Johnson, who owns the Virginia Beach-based consulting firm Shop Talk.

Credit Suisse analyst Gary Balter told investors that Circuit City's demise will help Best Buy cement its position as the market leader. Best Buy's shares rose 8 percent to $29.34 each in trading Friday.

Circuit City's locations in Canada may yet be sold as a going concern and will continue to operate.

Four companies - Liquidators Great American Group, Hudson Capital Partners, SB Capital Group and Tiger Capital Group - won the right to liquidate Circuit City's assets in a court-sanctioned auction. The retailer's creditors are guaranteed to get the first 70.5 percent of the value of the inventory, which is worth as much as $1.3 billion.

Stockholders will probably get nothing, Circuit City said.

Liquidation s often offer good bargains, Johnson said. "In most liquidation cases... there's kind of a progressive markdown, but usually there's some great values from the beginning."

The company had no choice but to liquidate, Marcum said. "This is the only possible path for our company."

The Associated Press and Bloomberg News contributed to this report.

Kathy Adams, (757) 446-2583, kathy.adams@pilotonline.com