Circuit City
Encyclopedia
Circuit City Stores, Inc. (former NYSE
ticker symbol CC) was an American
retailer in brand-name consumer electronics, personal computers, entertainment software, and (until 2000) large appliances. The company opened its first store in 1949 and pioneered the electronics superstore format in the 1970s. Circuit City liquidated
its final American retail stores in 2009 following a bankruptcy
filing and subsequent failure to find a buyer.
The "Circuit City" brand is now owned by Systemax, which uses the brand to sell electronics as an online retailer, CircuitCity.com
. On May 11, 2009, Systemax bought the brand, trademark and e-commerce business at an auction from Circuit City Stores, Inc. Systemax had earlier acquired CompUSA
and TigerDirect which now operate as online retailers. Systemax in April 2009 signed a stalking horse
agreement for $6.5 million which is an initial offer for the bankrupt company's assets.
At the time of liquidation, Circuit City was the second largest U.S. electronics retailer, after Best Buy
. There were 567 Circuit City Superstores nationwide, ranging in size from 15,000 to 45,000 square feet (1400 to 4000 m²), when the company announced total liquidation. 155 of the stores were closed when the company initially filed for Chapter 11 bankruptcy
in November 2008 in an attempt to continue operations. However, attributing its ultimate demise to the lack of consumer spending and overall economic downturn during the late 2000s recession
, Circuit City began liquidating its remaining stores on January 16, 2009, and all were closed by March 8, 2009.
In January 2010, the main Circuit City headquarters building was placed up for sale. The five-story 288650 square feet (26,816.5 m²) office building, Deep Run I, had been appraised at $46.2 million. New York-based Lexington Property Trust, defaulted on a $17 million commercial mortgage and the lender foreclosed on the property. An asking price has since been set at $11 million.
The former headquarters was sold in September 2010, for $3 million to DRCC Properties, LLC. They also bought the 58 acres (234,717.9 m²) of land that the building sits on for $2.75 million.
Abraham L. Hecht
joined Wurtzel as a partner. Both founders, Hecht and Wurtzel, died in 1985.
In 1932, Samuel S. Wurtzel opened the first Wards Company retail store in Richmond, Virginia
, at 705 West Broad Street. Wards Company and Circuit City are completely unrelated to the other former retailer that went out of business in the 2000s, Montgomery Ward
. The name "Wards" was actually an acronym composed of the founder's last initial and the initials of members of his family (W = Wurtzel; A = Alan; R = Ruth; D = David; S = Sam).
By 1959, Wards Company operated four television and home appliance stores in Richmond. The company continued to grow and acquired stores in other locations including Albany, New York
; Mobile, Alabama
; Washington, DC; and Costa Mesa, California
. During the 1970s and early 1980s it also sold mail-order under the name Dixie Hi Fi, advertising in the hi-fi magazines of the day. In Richmond, Wards experimented with several retail formats including smaller mall outlets branded "Sight-n-Sound" and "Circuit City". Sight-n-Sound and Circuit City stores were replaced by the Circuit City Superstore format.
Wards Company officially changed its name to Circuit City and became listed on the New York Stock Exchange
in 1984. One of the company's early slogans was "Circuit City — Where the Streets are Paved with Bargains." The company, which had leased floor space from the Zody's
department stores as well as other department stores, began acquiring retail stores and turning them into Circuit City Superstores. The first of these replacements occurred in Knoxville, Tennessee
; Charleston, South Carolina
; and Hampton, Virginia
. In 1981, Circuit City entered the New York City
market by acquiring the six remaining stores of the bankrupt Lafayette Radio
chain. They operated the stores under the "Lafayette/Circuit City" name and expanded to 15 locations, but the stores were not profitable and were closed in 1986 after spending US$20 million to enter the market. Wurtzel served as president of the company until 1970. He remained the chairman until 1984. When he stepped down, his son Alan served as chairman until 1994.
Wards purchased a new headquarters building at 2040 Thalbro Street (named after Thalhimer Bros. Department Store) in Richmond, Virginia and in the extra space opened "Wards Loading Dock," its first big-box format in 1974. The large-format store was very popular with customers. The company continued to expand with the new format modeled after "Wards Loading Dock" and renamed it Circuit City Superstore in 1981. Circuit City began to replace its smaller stores with the Superstore format and started a nationwide expansion.
In 1988, the company began constructing the new "plug" design Superstore stores. During this era, Circuit City became known for its exceptional service, going so far as to have many of its staff factory-trained. Its slogan, likewise, was "Welcome to Circuit City, Where Service Is State of the Art."
In 1998, Circuit City returned to New York City opening a 40000 sq ft (3,716.1 m²) Superstore in Union Square, the first of two planned Manhattan locations.
Also in 1998, Circuit City introduced the "Pluggie" mascot that was seen on television and in-store advertising. The mascot was a plug similar to the one seen on Circuit City television commercials plugging into store fronts, but had a smiley face and arms. Pluggie was discontinued when the new circle logo was introduced in 2001.
Carmax
is a used car auto superstore concept developed in 1991 at Circuit City by Austin Ligon
, then Circuit City Sr.VP Planning, and Rick Sharp,then Circuit City CEO. The goal of CarMax was to revolutionize used car retailing through a combination of large selection (400+ used cars at each store); low, no-haggle pricing; guaranteed quality; and a consumer-friendly shopping experience. The first location opened in Richmond, VA in September 1993. CarMax
grew slowly for its first four years as the team refined the basic concept, then went public through an IPO as a "tracking stock" (KMX) of Circuit City in February 1997. The offering was managed by Morgan Stanley and Goldman Sachs, and raised more than $400mm for a 20% interest in the company, with Circuit City retaining the remaining 80% ownership. CarMax
used the proceeds to repay Circuit City's initial $170mm investment in the company, then used the remainder to grow rapidly, adding 27 more stores from 1997 to 2000, and turning its first profit in FY2001. Circuit City sold a further 10% of its interest in CarMax in July 2001 for $140mm, with proceeds going to Circuit City. CarMax was spun off from Circuit City in a tax free distribution to shareholders in October 2002 to allow both companies to grow and be valued independently. The stock distribution provided Circuit City shareholders with KMX stock valued at over $1.2bn at the time of the spin off in 2002.
CarMax continued to grow rapidly to it current 103 used car stores in 49 markets throughout the US in 2010. CarMax will sell nearly 600,000 retail and wholesale cars, and record total revenue of nearly $9 billion in FY2011. At over $85mm in sales per store, CarMax used car superstores are among the highest volume retail stores in the U.S. CarMax, Inc. is a Fortune 500 company traded on the New York Stock Exchange as KMX, and was named one of Fortune's "100 Best Companies to Work For" for the sixth consecutive year in 2010. The CarMax stock distributed to Circuit City shareholders in October 2002 would have a market value of approximately $3.8bn as of at 31 December 2010.
Circuit City Express was a chain of mall-based Circuit City stores with over 55 locations at its peak. The first locations opened in Baltimore, Maryland; Richmond, Virginia; and McLean, Virginia in 1989. The stores were originally called "Impulse," but were later renamed in 1995 to focus on the strength of the Circuit City brand. These stores focused on small electronic products for personal use or to be given as gifts. Cellular phones were a major focus of the business since all major carriers were sold until the exclusive agreement with Verizon Wireless in 2004. Circuit City Express stores offered Superstore prices and the Circuit City "Price Match Guarantee" in a mall environment. Most of the locations closed in the early 2000s as the original 10 year leases expired.
DIVX
was developed by Circuit City and launched in 1997 as a complement to DVD. DIVX discs cost $5 each, but could only be played for 48 hours on proprietary set-top players before a continuation fee was required to continue viewing. The player was connected to a phone line to check whether the disc was still valid. Opposition to the format and limited acceptance by the public led Circuit City to discontinue the format in 1999. Circuit City took a US$114 million loss to close its DIVX division.
Firedog was launched in August 2006 to provide in-store, in-home, and online computer and home theatre
technical support and installation services in competition with other retailers' consumer and business technical services offerings such as Best Buy
's Geek Squad
and Staples EasyTech. The firedog brand was sold to Firstmark for US$250,000 in September 2009.
First North American National Bank was created by Circuit City to operate its private-label credit card in 1990. In 2002, Circuit City began offering a co-branded Visa credit card. It sold both of these operations in 2004 to Bank One (now Chase Bank).
Patapsco Designs was acquired by Circuit City in 1987. The company was in charge of designing product displays and other electronic services for Circuit City. Patapsco Designs was founded in 1977 and is based in Frederick, Maryland and in November 2004 was acquired by American Computer Development Inc. Patapsco Designs, Inc. filed a voluntary petition for reorganization under Chapter 11 Bankruptcy in joint administration with Circuit City Stores, Inc. in November 2008.
By 2000, many Circuit City stores were out of date and in bad locations, unable to compete with the competition from newer Best Buy stores. So, in 2000, Circuit City exited the large appliance business and debuted a more self-serve "Big Box" format called "Horizon". The move was controversial because in the previous year Circuit City was the number two appliance retailer in the United States, only behind Sears. The company had earned nearly US$1.6 billion in sales revenue from large appliances in 1999. Executives at the time were worried about the competition from Home Depot and Lowe's
and believed that there would be a big savings in warehouse storage and delivery costs by exiting the large appliance business. Years later, it was realized that Circuit City missed out on the residential housing boom in the mid 2000s, that saw a dramatic rise in new appliance sales.
The new "Horizon" stores abandoned the original showroom experience for a brighter, more open sales floor format with open ceilings, low fixtures, and wood floor aisles to allow customers to browse the merchandise easily. The format allowed putting all products on the sales floor, except those that are too large for customers to carry themselves. Shopping carts were added for the expanded assortment of grab-and-go merchandise. A row of registers were located at the front of the store for the first time for quick checkout. Previously, the stores only had registers located within each department since the salespeople were on commission. Even though the new format had commissioned sales people, it was becoming very similar to Best Buy.
Every Superstore was retrofitted after the exit from the large appliance business, using the space for an expanded self-serve computer accessory and software selection. Stores at the time only sold PlayStation games under an exclusive agreement with Sony
. The new space allowed them to sell Nintendo, Sega, and eventually Xbox games after the agreement ended. Music and movie sales had been added to most stores years before, but the extra space allowed the selection to be added to smaller stores. The retrofitting project alone cost the company US$1.5 billion.
In 2003, Circuit City converted to a single hourly pay structure in all stores, eliminating commissioned sales. Many previously commissioned sales associates were offered new positions as hourly "product specialists," while 3,900 salespeople were laid off, saving the company about $130 million per year. The day of the announcement, Wednesday, February 5, 2003, also known as "Bloody Wednesday", all stores remained closed until noon, to give the current associates the news and to prepare stores for the adjustment.
In 2004, with the expansion of the wireless phone market, Circuit City partnered with Verizon Wireless
to include full-service Verizon Wireless sales and service centers in each Superstore. These locations were owned and staffed by Verizon Wireless. Circuit City stopped selling wireless phones with all other carriers due the agreement.
. Circuit City paid approximately US$284 million for InterTAN's 980 stores, which operated in Canada under the trade names RadioShack
, Rogers Plus and Battery Plus. Chairman and CEO Alan McCollough believed the move provided an easy entry into Canada, a country where Best Buy had been expanding. RadioShack sued InterTan in April 2004 over the branding use of RadioShack in Canada. Circuit City lost the lawsuit and all Canada locations were renamed The Source by Circuit City in 2005. These stores were sold to Bell Canada
and continue to operate.
court case. The court found that important information pertaining to sale items was purposely obscured within the advertisement, thus potentially deceiving customers.
The same year, Harris and Kaufman, Attorneys at Law, successfully represented a class action
suit of Circuit City employees caught in an unfair arbitration
agreement. The court's ruling in Gonlugar v. Circuit City Stores, Inc., found the store's arbitration agreement to be "tainted with illegality." The arbitration agreement was found to be so one-sided that it was unconscionable. Harris and Kaufman maintained the arbitration agreement bound only the employee to arbitration, required the employee to pay fees to Circuit City for initiating the arbitration (Circuit City paid no such fee), imposed a shortened statute of limitations
on the employee (not on Circuit City), and prohibited class actions.
During the week of August 31, 2007, the California Supreme Court ruled that the Circuit City arbitration agreement, which all 46,000 employees were required to sign, violated the state's labor laws and that Circuit City employees may sue the store for labor law violations despite having signed it. The document requires employees to waive their right to sue their employer and establishes a cap for damages regarding any wrongdoing on the part of corporate or management, which violates California's well-established law on arbitration agreements.
Circuit City's City Advantage Plan was also challenged in a United States District Court
in Massachusetts
. The plaintiffs' claim concerned Circuit City's cancellation of its warranty
plan without full disclosure of the plan at the time of sale. The plaintiffs cited breach of contract, unjust enrichment, and violation of the Massachusetts Consumer Protection Act. Circuit City requested the matter be dismissed. The court, however, upheld the plaintiffs' claim that the monies paid for the protection plan be reimbursed and credit be issued for non-working goods returned.
Liquidators handling the sale of remaining Circuit City inventory have also become the target of consumer complaints, not only for often-uncompetitive pricing of items but also for an "all sales final" policy which allows the sale of defective or damaged merchandise at former Circuit City locations with no recourse afforded to the consumer.
On February 8, 2007, Circuit City announced that it planned to close seven domestic Superstores and a Kentucky distribution center to cut costs and improve its financial performance. News media reports also mention that 62 stores in Canada were to close.
Circuit City announced on February 23, 2007 that its Chief Financial Officer, Michael Foss, would leave the company. This unsettled investors and analysts concerned about management turnover. "This represents the third departure of a senior executive in the past six months, and the second departure of a top-five executive in the past month" said Goldman Sachs analyst Matthew Fassler in a client note. Chief Executive Office Phil Schoonover’s "hand-picked team is turning over faster than we would like to see in a turnaround situation."
In 2007, the starting wage for new employees was dropped from $8.75 an hour down to $7.40 an hour ($6.55 being the federal minimum wage at the time). In a press release on March 28, 2007, Circuit City announced that in a "wage management" decision in order to cut costs, it had laid off approximately 3400 better-paid associates and would re-staff the positions at the lower market-based salaries. Laid-off associates were provided severance and offered a chance to be re-hired after ten weeks at prevailing wages. The Washington Post reported interviews with management concerning the firings.
The Post later reported in May 2007 that the layoffs appeared to be 'backfiring' and resulting in slower sales.
In April 2008, video rental firm Blockbuster announced a bid worth $1 billion to purchase Circuit City. In July 2008, Blockbuster withdrew its offer due to market conditions.
Philip J. Schoonover, CEO, President and Chairman of the Board of Circuit City Stores, Inc. announced his immediate resignation on September 22, 2008. James A. Marcum, former Vice Chairman of the board, was named acting CEO. Allen King was selected Chairman of the Board.
This switch was said to be due to a stream of losses stemming from the rapid decline of flat-panel TV prices, and possibly due to the strong call for Schoonover's removal from activist shareholder
Mark Wattles.
On November 4, 2008, Circuit City announced that it would close 155 stores and lay off 17% of its workforce by the end of the year as a result of continuing difficulties in remaining profitable. On November 7, 2008, Circuit City laid off between 500 and 800 corporate employees from its Richmond, Virginia
headquarters. The approximately 1000 remaining corporate employees were consolidated into one building in an effort to further reduce costs and improve profitability. On November 10, 2008, Circuit City filed for bankruptcy protection under Chapter 11
of the United States Bankruptcy Code. At that time, Circuit City's stock prices traded well below $1 per share, and were removed from listing on the New York Stock Exchange
.
In bankruptcy court, Circuit City was approved to borrow $1.6 billion to finance operations while restructuring. Court filings revealed that the company had assets of $3.4 billion and debt of $2.32 billion, including a $119 million debt to Hewlett-Packard and a $116 million debt to Samsung Electronics
. Chief executive James A. Marcum promised that the stores would stay open and the chain would not be liquidated.
On November 18, 2008, it was announced that Ricardo Salinas Pliego
, current owner of Mexican television broadcaster TV Azteca
, had purchased 28 percent of Circuit City.
On January 10, 2009, it was announced by a company spokesman that Circuit City needed a buyer by January 16, 2009 to keep from shutting its doors due to an approaching deadline set by the court and creditors. Although two unnamed parties were interested in buying out Circuit City, a bidder could not be found, so Circuit City, with bankruptcy court approval, converted its Chapter 11 bankruptcy to Chapter 7, and started airing "going out of business" commercials, as they started closing all of their stores. The Canadian operations, which are run under The Source by Circuit City banner, were not initially affected by the liquidation, but were later sold to Bell Canada
.
According to Circuit City's website, the company announced on January 16, 2009 that it intended to close all of its stores. Reportedly, over 30,000 employees lost jobs in the liquidation, as well as 45% of Verizon's Circuit City sales force being laid off with the remainder resigning or transferring to other Verizon locations.
The final day of operations for Circuit City brick and mortar stores was March 8, 2009. Besides retail auto dealerships, Circuit City closed more retail locations in the U.S. than any other retail chain in 2009.
After the final date of operation for all Circuit City stores, the company's online store was replaced with a page that read as follows:
On May 19, 2009, it was announced that the Circuit City brand name, logo, and website had been purchased by Systemax Inc. for US$14 million, which had also previously acquired the CompUSA
brand after the store chain's liquidation. Systemax relaunched the circuitcity.com website on May 22, 2009, as an online retailer of consumer electronics. The revived site's front page looks similar to the original front page, while other pages have a similar appearance and flow of Systemax's CompUSA.com and TigerDirect.com's pages. It sells the same products as the TigerDirect and CompUSA sites.
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
ticker symbol CC) was an American
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
retailer in brand-name consumer electronics, personal computers, entertainment software, and (until 2000) large appliances. The company opened its first store in 1949 and pioneered the electronics superstore format in the 1970s. Circuit City liquidated
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...
its final American retail stores in 2009 following a bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
filing and subsequent failure to find a buyer.
The "Circuit City" brand is now owned by Systemax, which uses the brand to sell electronics as an online retailer, CircuitCity.com
CircuitCity.com
CircuitCity.com was originally the Web domain for the now defunct Circuit City chain of stores...
. On May 11, 2009, Systemax bought the brand, trademark and e-commerce business at an auction from Circuit City Stores, Inc. Systemax had earlier acquired CompUSA
CompUSA
CompUSA is a retailer and reseller of consumer electronics, technology products and computer services. Its headquarters are in Miami, Florida.Until its reorganization, CompUSA, Inc. was a wholly owned subsidiary of U.S. Commercial Corp S.A.B...
and TigerDirect which now operate as online retailers. Systemax in April 2009 signed a stalking horse
Stalking horse
A stalking horse is a person who tests a concept with someone or mounts a challenge against them on behalf of an anonymous third party. If the idea proves viable and/or popular, the anonymous figure can then declare their interest and advance the concept with little risk of failure...
agreement for $6.5 million which is an initial offer for the bankrupt company's assets.
At the time of liquidation, Circuit City was the second largest U.S. electronics retailer, after Best Buy
Best Buy
Best Buy Co., Inc. is an American specialty retailer of consumer electronics in the United States, accounting for 19% of the market. It also operates in Mexico, Canada & China. The company's subsidiaries include Geek Squad, CinemaNow, Magnolia Audio Video, Pacific Sales, and, in Canada operates...
. There were 567 Circuit City Superstores nationwide, ranging in size from 15,000 to 45,000 square feet (1400 to 4000 m²), when the company announced total liquidation. 155 of the stores were closed when the company initially filed for Chapter 11 bankruptcy
Chapter 11, Title 11, United States Code
Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most...
in November 2008 in an attempt to continue operations. However, attributing its ultimate demise to the lack of consumer spending and overall economic downturn during the late 2000s recession
Late 2000s recession
The late-2000s recession, sometimes referred to as the Great Recession or Lesser Depression or Long Recession, is a severe ongoing global economic problem that began in December 2007 and took a particularly sharp downward turn in September 2008. The Great Recession has affected the entire world...
, Circuit City began liquidating its remaining stores on January 16, 2009, and all were closed by March 8, 2009.
In January 2010, the main Circuit City headquarters building was placed up for sale. The five-story 288650 square feet (26,816.5 m²) office building, Deep Run I, had been appraised at $46.2 million. New York-based Lexington Property Trust, defaulted on a $17 million commercial mortgage and the lender foreclosed on the property. An asking price has since been set at $11 million.
The former headquarters was sold in September 2010, for $3 million to DRCC Properties, LLC. They also bought the 58 acres (234,717.9 m²) of land that the building sits on for $2.75 million.
Wards
Samuel S. Wurtzel studied accounting and got the idea to open a television store while on vacation.Abraham L. Hecht
Abraham Hecht
Abraham Hecht born on April 5, 1922 in Brooklyn, New York; is an American Orthodox rabbi affiliated with the Chabad-Lubavitch movement, and is president of the Rabbinical Alliance of America - Igud HaRabanim....
joined Wurtzel as a partner. Both founders, Hecht and Wurtzel, died in 1985.
In 1932, Samuel S. Wurtzel opened the first Wards Company retail store in Richmond, Virginia
Richmond, Virginia
Richmond is the capital of the Commonwealth of Virginia, in the United States. It is an independent city and not part of any county. Richmond is the center of the Richmond Metropolitan Statistical Area and the Greater Richmond area...
, at 705 West Broad Street. Wards Company and Circuit City are completely unrelated to the other former retailer that went out of business in the 2000s, Montgomery Ward
Montgomery Ward
Montgomery Ward is an online retailer that carries the same name as the former American department store chain, founded as the world's #1 mail order business in 1872 by Aaron Montgomery Ward, and which went out of business in 2001...
. The name "Wards" was actually an acronym composed of the founder's last initial and the initials of members of his family (W = Wurtzel; A = Alan; R = Ruth; D = David; S = Sam).
By 1959, Wards Company operated four television and home appliance stores in Richmond. The company continued to grow and acquired stores in other locations including Albany, New York
Albany, New York
Albany is the capital city of the U.S. state of New York, the seat of Albany County, and the central city of New York's Capital District. Roughly north of New York City, Albany sits on the west bank of the Hudson River, about south of its confluence with the Mohawk River...
; Mobile, Alabama
Mobile, Alabama
Mobile is the third most populous city in the Southern US state of Alabama and is the county seat of Mobile County. It is located on the Mobile River and the central Gulf Coast of the United States. The population within the city limits was 195,111 during the 2010 census. It is the largest...
; Washington, DC; and Costa Mesa, California
Costa Mesa, California
Costa Mesa is a city in Orange County, California. The population was 109,960 at the 2010 census. Since its incorporation in 1953, the city has grown from a semi-rural farming community of 16,840 to a primarily suburban and "edge" city with an economy based on retail, commerce, and light...
. During the 1970s and early 1980s it also sold mail-order under the name Dixie Hi Fi, advertising in the hi-fi magazines of the day. In Richmond, Wards experimented with several retail formats including smaller mall outlets branded "Sight-n-Sound" and "Circuit City". Sight-n-Sound and Circuit City stores were replaced by the Circuit City Superstore format.
Change to Circuit City
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
in 1984. One of the company's early slogans was "Circuit City — Where the Streets are Paved with Bargains." The company, which had leased floor space from the Zody's
Zody's
Zodys was a chain of discount retail stores that operated in the United States from 1960 to 1986. The chain operated locations in California, Arizona, Nevada, New Mexico, and Michigan....
department stores as well as other department stores, began acquiring retail stores and turning them into Circuit City Superstores. The first of these replacements occurred in Knoxville, Tennessee
Knoxville, Tennessee
Founded in 1786, Knoxville is the third-largest city in the U.S. state of Tennessee, U.S.A., behind Memphis and Nashville, and is the county seat of Knox County. It is the largest city in East Tennessee, and the second-largest city in the Appalachia region...
; Charleston, South Carolina
Charleston, South Carolina
Charleston is the second largest city in the U.S. state of South Carolina. It was made the county seat of Charleston County in 1901 when Charleston County was founded. The city's original name was Charles Towne in 1670, and it moved to its present location from a location on the west bank of the...
; and Hampton, Virginia
Hampton, Virginia
Hampton is an independent city that is not part of any county in Southeast Virginia. Its population is 137,436. As one of the seven major cities that compose the Hampton Roads metropolitan area, it is on the southeastern end of the Virginia Peninsula. Located on the Hampton Roads Beltway, it hosts...
. In 1981, Circuit City entered the New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
market by acquiring the six remaining stores of the bankrupt Lafayette Radio
LaFayette Radio
Lafayette Radio Electronics Corporation was a radio manufacturer and retailer based in Syosset, New York. The company sold radio sets, amateur radio equipment, citizen's band radios, and other communications equipment, as well as electronic components and tools through retail outlets as well as...
chain. They operated the stores under the "Lafayette/Circuit City" name and expanded to 15 locations, but the stores were not profitable and were closed in 1986 after spending US$20 million to enter the market. Wurtzel served as president of the company until 1970. He remained the chairman until 1984. When he stepped down, his son Alan served as chairman until 1994.
Superstores
In 1988, the company began constructing the new "plug" design Superstore stores. During this era, Circuit City became known for its exceptional service, going so far as to have many of its staff factory-trained. Its slogan, likewise, was "Welcome to Circuit City, Where Service Is State of the Art."
In 1998, Circuit City returned to New York City opening a 40000 sq ft (3,716.1 m²) Superstore in Union Square, the first of two planned Manhattan locations.
Also in 1998, Circuit City introduced the "Pluggie" mascot that was seen on television and in-store advertising. The mascot was a plug similar to the one seen on Circuit City television commercials plugging into store fronts, but had a smiley face and arms. Pluggie was discontinued when the new circle logo was introduced in 2001.
Company diversification
CarMax
CarMax is the United States' largest used-car retailer and a Fortune 500 company. The first CarMax used car auto superstore was opened in September 1993. In the fiscal year ending February 28, 2009, more than 350,000 cars were sold; as of August 2010 the company has 103 locations.- Concept :The...
is a used car auto superstore concept developed in 1991 at Circuit City by Austin Ligon
Austin Ligon
William Austin Ligon is the co-founder and retired CEO of CarMax, Inc. He retired in June 2006, and is now a private angel-stage investor. Among his recent investments are Gazelle.com; Redfin.com; Zigmo; Café Caturra; and MotorExchange India....
, then Circuit City Sr.VP Planning, and Rick Sharp,then Circuit City CEO. The goal of CarMax was to revolutionize used car retailing through a combination of large selection (400+ used cars at each store); low, no-haggle pricing; guaranteed quality; and a consumer-friendly shopping experience. The first location opened in Richmond, VA in September 1993. CarMax
CarMax
CarMax is the United States' largest used-car retailer and a Fortune 500 company. The first CarMax used car auto superstore was opened in September 1993. In the fiscal year ending February 28, 2009, more than 350,000 cars were sold; as of August 2010 the company has 103 locations.- Concept :The...
grew slowly for its first four years as the team refined the basic concept, then went public through an IPO as a "tracking stock" (KMX) of Circuit City in February 1997. The offering was managed by Morgan Stanley and Goldman Sachs, and raised more than $400mm for a 20% interest in the company, with Circuit City retaining the remaining 80% ownership. CarMax
CarMax
CarMax is the United States' largest used-car retailer and a Fortune 500 company. The first CarMax used car auto superstore was opened in September 1993. In the fiscal year ending February 28, 2009, more than 350,000 cars were sold; as of August 2010 the company has 103 locations.- Concept :The...
used the proceeds to repay Circuit City's initial $170mm investment in the company, then used the remainder to grow rapidly, adding 27 more stores from 1997 to 2000, and turning its first profit in FY2001. Circuit City sold a further 10% of its interest in CarMax in July 2001 for $140mm, with proceeds going to Circuit City. CarMax was spun off from Circuit City in a tax free distribution to shareholders in October 2002 to allow both companies to grow and be valued independently. The stock distribution provided Circuit City shareholders with KMX stock valued at over $1.2bn at the time of the spin off in 2002.
CarMax continued to grow rapidly to it current 103 used car stores in 49 markets throughout the US in 2010. CarMax will sell nearly 600,000 retail and wholesale cars, and record total revenue of nearly $9 billion in FY2011. At over $85mm in sales per store, CarMax used car superstores are among the highest volume retail stores in the U.S. CarMax, Inc. is a Fortune 500 company traded on the New York Stock Exchange as KMX, and was named one of Fortune's "100 Best Companies to Work For" for the sixth consecutive year in 2010. The CarMax stock distributed to Circuit City shareholders in October 2002 would have a market value of approximately $3.8bn as of at 31 December 2010.
Circuit City Express was a chain of mall-based Circuit City stores with over 55 locations at its peak. The first locations opened in Baltimore, Maryland; Richmond, Virginia; and McLean, Virginia in 1989. The stores were originally called "Impulse," but were later renamed in 1995 to focus on the strength of the Circuit City brand. These stores focused on small electronic products for personal use or to be given as gifts. Cellular phones were a major focus of the business since all major carriers were sold until the exclusive agreement with Verizon Wireless in 2004. Circuit City Express stores offered Superstore prices and the Circuit City "Price Match Guarantee" in a mall environment. Most of the locations closed in the early 2000s as the original 10 year leases expired.
DIVX
DIVX
DIVX was an unsuccessful attempt by Circuit City and the entertainment law firm Ziffren, Brittenham, Branca and Fischer to create an alternative to video rental in the United States.-Format:...
was developed by Circuit City and launched in 1997 as a complement to DVD. DIVX discs cost $5 each, but could only be played for 48 hours on proprietary set-top players before a continuation fee was required to continue viewing. The player was connected to a phone line to check whether the disc was still valid. Opposition to the format and limited acceptance by the public led Circuit City to discontinue the format in 1999. Circuit City took a US$114 million loss to close its DIVX division.
Firedog was launched in August 2006 to provide in-store, in-home, and online computer and home theatre
Home cinema
Home cinema, also commonly called home theater, are home entertainment set-ups that seek to reproduce a movie theater experience and mood with the help of video and audio equipment in a private home....
technical support and installation services in competition with other retailers' consumer and business technical services offerings such as Best Buy
Best Buy
Best Buy Co., Inc. is an American specialty retailer of consumer electronics in the United States, accounting for 19% of the market. It also operates in Mexico, Canada & China. The company's subsidiaries include Geek Squad, CinemaNow, Magnolia Audio Video, Pacific Sales, and, in Canada operates...
's Geek Squad
Geek Squad
The Geek Squad is a subsidiary of the Best Buy Company and is based in Richfield, Minnesota. It was originally founded on June 16, 1994 by Robert Stephens. The company offers various computer-related services and accessories for residential and commercial clients...
and Staples EasyTech. The firedog brand was sold to Firstmark for US$250,000 in September 2009.
First North American National Bank was created by Circuit City to operate its private-label credit card in 1990. In 2002, Circuit City began offering a co-branded Visa credit card. It sold both of these operations in 2004 to Bank One (now Chase Bank).
Patapsco Designs was acquired by Circuit City in 1987. The company was in charge of designing product displays and other electronic services for Circuit City. Patapsco Designs was founded in 1977 and is based in Frederick, Maryland and in November 2004 was acquired by American Computer Development Inc. Patapsco Designs, Inc. filed a voluntary petition for reorganization under Chapter 11 Bankruptcy in joint administration with Circuit City Stores, Inc. in November 2008.
Horizon format
Lowe's
Lowe's Companies, Inc. is a U.S.-based chain of retail home improvement and appliance stores. Founded in 1946 in North Wilkesboro, North Carolina, the chain now serves more than 14 million customers a week in its 1,710 stores in the United States and 20 in Canada. Expansion into Canada began in...
and believed that there would be a big savings in warehouse storage and delivery costs by exiting the large appliance business. Years later, it was realized that Circuit City missed out on the residential housing boom in the mid 2000s, that saw a dramatic rise in new appliance sales.
The new "Horizon" stores abandoned the original showroom experience for a brighter, more open sales floor format with open ceilings, low fixtures, and wood floor aisles to allow customers to browse the merchandise easily. The format allowed putting all products on the sales floor, except those that are too large for customers to carry themselves. Shopping carts were added for the expanded assortment of grab-and-go merchandise. A row of registers were located at the front of the store for the first time for quick checkout. Previously, the stores only had registers located within each department since the salespeople were on commission. Even though the new format had commissioned sales people, it was becoming very similar to Best Buy.
Every Superstore was retrofitted after the exit from the large appliance business, using the space for an expanded self-serve computer accessory and software selection. Stores at the time only sold PlayStation games under an exclusive agreement with Sony
Sony
, commonly referred to as Sony, is a Japanese multinational conglomerate corporation headquartered in Minato, Tokyo, Japan and the world's fifth largest media conglomerate measured by revenues....
. The new space allowed them to sell Nintendo, Sega, and eventually Xbox games after the agreement ended. Music and movie sales had been added to most stores years before, but the extra space allowed the selection to be added to smaller stores. The retrofitting project alone cost the company US$1.5 billion.
In 2003, Circuit City converted to a single hourly pay structure in all stores, eliminating commissioned sales. Many previously commissioned sales associates were offered new positions as hourly "product specialists," while 3,900 salespeople were laid off, saving the company about $130 million per year. The day of the announcement, Wednesday, February 5, 2003, also known as "Bloody Wednesday", all stores remained closed until noon, to give the current associates the news and to prepare stores for the adjustment.
In 2004, with the expansion of the wireless phone market, Circuit City partnered with Verizon Wireless
Verizon Wireless
Cellco Partnership, doing business as Verizon Wireless, is one of the largest mobile network operators in the United States. The network has 107.7 million subscribers as of 2011, making it the largest wireless service provider in America....
to include full-service Verizon Wireless sales and service centers in each Superstore. These locations were owned and staffed by Verizon Wireless. Circuit City stopped selling wireless phones with all other carriers due the agreement.
Canada expansion
In April 2004, Circuit City announced its purchase of Canadian retailer InterTANInterTAN
InterTAN Canada Ltd. was a Canadian consumer electronics retailer that operated stores under the banner "The Source by Circuit City" and a single "THS Studio" location. It was a wholly owned subsidiary of Circuit City Stores Inc., as of May 19, 2004. InterTAN is based in Barrie, Ontario, Canada...
. Circuit City paid approximately US$284 million for InterTAN's 980 stores, which operated in Canada under the trade names RadioShack
RadioShack
RadioShack Corporation is an American franchise of electronics retail stores in the United States, as well as parts of Europe, South America and Africa. As of 2008, RadioShack reported net sales and operating revenues of $4.81 billion. The headquarters of RadioShack is located in Downtown...
, Rogers Plus and Battery Plus. Chairman and CEO Alan McCollough believed the move provided an easy entry into Canada, a country where Best Buy had been expanding. RadioShack sued InterTan in April 2004 over the branding use of RadioShack in Canada. Circuit City lost the lawsuit and all Canada locations were renamed The Source by Circuit City in 2005. These stores were sold to Bell Canada
Bell Canada
Bell Canada is a major Canadian telecommunications company. Including its subsidiaries such as Bell Aliant, Northwestel, Télébec, and NorthernTel, it is the incumbent local exchange carrier for telephone and DSL Internet services in most of Canada east of Manitoba and in the northern territories,...
and continue to operate.
Criticism and controversy
In 2005, Circuit City agreed to pay $173,220 in settlement and investigation reimbursement costs due to a false advertising claim in a 2004 New JerseyNew Jersey
New Jersey is a state in the Northeastern and Middle Atlantic regions of the United States. , its population was 8,791,894. It is bordered on the north and east by the state of New York, on the southeast and south by the Atlantic Ocean, on the west by Pennsylvania and on the southwest by Delaware...
court case. The court found that important information pertaining to sale items was purposely obscured within the advertisement, thus potentially deceiving customers.
The same year, Harris and Kaufman, Attorneys at Law, successfully represented a class action
Class action
In law, a class action, a class suit, or a representative action is a form of lawsuit in which a large group of people collectively bring a claim to court and/or in which a class of defendants is being sued...
suit of Circuit City employees caught in an unfair arbitration
Arbitration
Arbitration, a form of alternative dispute resolution , is a legal technique for the resolution of disputes outside the courts, where the parties to a dispute refer it to one or more persons , by whose decision they agree to be bound...
agreement. The court's ruling in Gonlugar v. Circuit City Stores, Inc., found the store's arbitration agreement to be "tainted with illegality." The arbitration agreement was found to be so one-sided that it was unconscionable. Harris and Kaufman maintained the arbitration agreement bound only the employee to arbitration, required the employee to pay fees to Circuit City for initiating the arbitration (Circuit City paid no such fee), imposed a shortened statute of limitations
Statute of limitations
A statute of limitations is an enactment in a common law legal system that sets the maximum time after an event that legal proceedings based on that event may be initiated...
on the employee (not on Circuit City), and prohibited class actions.
During the week of August 31, 2007, the California Supreme Court ruled that the Circuit City arbitration agreement, which all 46,000 employees were required to sign, violated the state's labor laws and that Circuit City employees may sue the store for labor law violations despite having signed it. The document requires employees to waive their right to sue their employer and establishes a cap for damages regarding any wrongdoing on the part of corporate or management, which violates California's well-established law on arbitration agreements.
Circuit City's City Advantage Plan was also challenged in a United States District Court
United States district court
The United States district courts are the general trial courts of the United States federal court system. Both civil and criminal cases are filed in the district court, which is a court of law, equity, and admiralty. There is a United States bankruptcy court associated with each United States...
in Massachusetts
Massachusetts
The Commonwealth of Massachusetts is a state in the New England region of the northeastern United States of America. It is bordered by Rhode Island and Connecticut to the south, New York to the west, and Vermont and New Hampshire to the north; at its east lies the Atlantic Ocean. As of the 2010...
. The plaintiffs' claim concerned Circuit City's cancellation of its warranty
Warranty
In business and legal transactions, a warranty is an assurance by one party to the other party that specific facts or conditions are true or will happen; the other party is permitted to rely on that assurance and seek some type of remedy if it is not true or followed.In real estate transactions, a...
plan without full disclosure of the plan at the time of sale. The plaintiffs cited breach of contract, unjust enrichment, and violation of the Massachusetts Consumer Protection Act. Circuit City requested the matter be dismissed. The court, however, upheld the plaintiffs' claim that the monies paid for the protection plan be reimbursed and credit be issued for non-working goods returned.
Liquidators handling the sale of remaining Circuit City inventory have also become the target of consumer complaints, not only for often-uncompetitive pricing of items but also for an "all sales final" policy which allows the sale of defective or damaged merchandise at former Circuit City locations with no recourse afforded to the consumer.
The City format
In 2007, a new 20000 square feet (1,858.1 m²) store format was introduced as "The City" and designed to eliminate previously under-utilized space. The smaller format gave the company greater flexibility to enter new markets and backfill existing ones. Most new store openings in 2008 used this new store format.On February 8, 2007, Circuit City announced that it planned to close seven domestic Superstores and a Kentucky distribution center to cut costs and improve its financial performance. News media reports also mention that 62 stores in Canada were to close.
Circuit City announced on February 23, 2007 that its Chief Financial Officer, Michael Foss, would leave the company. This unsettled investors and analysts concerned about management turnover. "This represents the third departure of a senior executive in the past six months, and the second departure of a top-five executive in the past month" said Goldman Sachs analyst Matthew Fassler in a client note. Chief Executive Office Phil Schoonover’s "hand-picked team is turning over faster than we would like to see in a turnaround situation."
In 2007, the starting wage for new employees was dropped from $8.75 an hour down to $7.40 an hour ($6.55 being the federal minimum wage at the time). In a press release on March 28, 2007, Circuit City announced that in a "wage management" decision in order to cut costs, it had laid off approximately 3400 better-paid associates and would re-staff the positions at the lower market-based salaries. Laid-off associates were provided severance and offered a chance to be re-hired after ten weeks at prevailing wages. The Washington Post reported interviews with management concerning the firings.
The Post later reported in May 2007 that the layoffs appeared to be 'backfiring' and resulting in slower sales.
In April 2008, video rental firm Blockbuster announced a bid worth $1 billion to purchase Circuit City. In July 2008, Blockbuster withdrew its offer due to market conditions.
Philip J. Schoonover, CEO, President and Chairman of the Board of Circuit City Stores, Inc. announced his immediate resignation on September 22, 2008. James A. Marcum, former Vice Chairman of the board, was named acting CEO. Allen King was selected Chairman of the Board.
This switch was said to be due to a stream of losses stemming from the rapid decline of flat-panel TV prices, and possibly due to the strong call for Schoonover's removal from activist shareholder
Activist shareholder
An activist shareholder uses an equity stake in a corporation to put public pressure on its management. The goals of activist shareholders range from financial to non-financial...
Mark Wattles.
Bankruptcy and liquidation
Richmond, Virginia
Richmond is the capital of the Commonwealth of Virginia, in the United States. It is an independent city and not part of any county. Richmond is the center of the Richmond Metropolitan Statistical Area and the Greater Richmond area...
headquarters. The approximately 1000 remaining corporate employees were consolidated into one building in an effort to further reduce costs and improve profitability. On November 10, 2008, Circuit City filed for bankruptcy protection under Chapter 11
Chapter 11, Title 11, United States Code
Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most...
of the United States Bankruptcy Code. At that time, Circuit City's stock prices traded well below $1 per share, and were removed from listing on the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
.
In bankruptcy court, Circuit City was approved to borrow $1.6 billion to finance operations while restructuring. Court filings revealed that the company had assets of $3.4 billion and debt of $2.32 billion, including a $119 million debt to Hewlett-Packard and a $116 million debt to Samsung Electronics
Samsung
The Samsung Group is a South Korean multinational conglomerate corporation headquartered in Samsung Town, Seoul, South Korea...
. Chief executive James A. Marcum promised that the stores would stay open and the chain would not be liquidated.
On November 18, 2008, it was announced that Ricardo Salinas Pliego
Ricardo Salinas Pliego
Ricardo Benjamín Salinas Pliego is a Mexican businessman and one of Forbes World's Richest People since 2000. He serves as President and CEO of Grupo Salinas and Grupo Elektra, two holdings with interests vested in telecommunications, media and retail stores, among those TV Azteca, Elektra,...
, current owner of Mexican television broadcaster TV Azteca
TV Azteca
Azteca, is the second largest Mexican television entertainment. It was established in 1983 as the state-owned Instituto Mexicano de la Televisión , a holding of the national TV networks channel 13 and 7 and was privatized under its current name in 1993 and now is part of Grupo Salinas...
, had purchased 28 percent of Circuit City.
Bell Canada
Bell Canada is a major Canadian telecommunications company. Including its subsidiaries such as Bell Aliant, Northwestel, Télébec, and NorthernTel, it is the incumbent local exchange carrier for telephone and DSL Internet services in most of Canada east of Manitoba and in the northern territories,...
.
According to Circuit City's website, the company announced on January 16, 2009 that it intended to close all of its stores. Reportedly, over 30,000 employees lost jobs in the liquidation, as well as 45% of Verizon's Circuit City sales force being laid off with the remainder resigning or transferring to other Verizon locations.
The final day of operations for Circuit City brick and mortar stores was March 8, 2009. Besides retail auto dealerships, Circuit City closed more retail locations in the U.S. than any other retail chain in 2009.
After the final date of operation for all Circuit City stores, the company's online store was replaced with a page that read as follows:
On May 19, 2009, it was announced that the Circuit City brand name, logo, and website had been purchased by Systemax Inc. for US$14 million, which had also previously acquired the CompUSA
CompUSA
CompUSA is a retailer and reseller of consumer electronics, technology products and computer services. Its headquarters are in Miami, Florida.Until its reorganization, CompUSA, Inc. was a wholly owned subsidiary of U.S. Commercial Corp S.A.B...
brand after the store chain's liquidation. Systemax relaunched the circuitcity.com website on May 22, 2009, as an online retailer of consumer electronics. The revived site's front page looks similar to the original front page, while other pages have a similar appearance and flow of Systemax's CompUSA.com and TigerDirect.com's pages. It sells the same products as the TigerDirect and CompUSA sites.