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Shutting down Circuit City to take time

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BY GREGORY J. GILLIGAN

MEDIA GENERAL NEWS SERVICE

Published: January 30, 2009

RICHMOND, Va. - Circuit City Stores Inc. has started the arduous process of dismantling its massive retail business, but it could take two years before the entire company completely disappears.

Going-out-of-business sales at its 567 stores began Monday and will end either on or before March 31.

"But after March 31, there is a tremendous amount of work to be done - and it is all behind the scenes," said W. Edward Clingman Jr., a principal at Clingman & Hanger Management Associates, a management consulting firm that specializes in winding down the business affairs of bankrupt companies.

"The company will shift from being an operating retailer to wind-down operator," said Clingman, who oversaw the final shutdown of defunct catalog showroom retailer Best Products.
Circuit City announced Friday, about two months after seeking bankruptcy protection, that it will liquidate its assets after it could not find a buyer or credit to continue operations. The company's demise is one of the largest failures of a U.S. retailer.

Most legal experts predict it will be about two years before Circuit City's business affairs are concluded.

"It just takes that long before the lights are cut off for the last time," said Mark A. Roberts, a managing director with Alvarez & Marsal, a global restructuring firm that is overseeing the shut down of Lehman Brothers Holdings.

By the time Circuit City is ready to close for good, only a handful of employees will remain - down from the 45,000 workers the retailer employed worldwide as of last February and the nearly 34,000 U.S. workers it had as of last week.

The bulk of the retailer's 1,500 corporate headquarters employees here will clear out their desks in the next several weeks, with the first likely to do so this week. Most should be gone by mid-March.

But Circuit City will need to keep some corporate employees. Experts say probably about 200 will be needed through April and then about 100 in the months after that. Later this year, the number of workers will dwindle even further, and will continue to do so into 2010.

To help wind down the chain's affairs, Circuit City will keep some employees who work in the accounting, legal, human resources, real estate and information technology departments.

"It is a long and slow process," Roberts said.

With a consortium of liquidators conducting going-out-of business sales at its 567 stores, Circuit City doesn't need, for instance, buyers, store planning personnel, and marketing and advertising professionals.

Some senior-level executives likely will get cut. The fate of James A. Marcum, the chain's vice chairman and acting president and chief executive, is not known.

But the company's chief lawyer, controller and treasurer probably will keep their positions for the time being, legal experts say, because those jobs are critical in maximizing the amount of money Circuit City can uncover to pay creditors.
Circuit City likely will file a plan of reorganization in the next several months that will spell out how it will repay creditors.

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