Can Circuit City Survive?
Circuit City (NYSE: CC) might be on the fast-track to failure, but that doesn’t mean it’s taking the new course lying down.
Even now, the nation-wide chain is in talks with two different parties interested in either buying out the stores or infusing more cash into the floundering company. It’s a nice thought, but both parties want to make sure such an investment would be sound first, which means Circuit City isn’t off the hook yet.
Ricardo Salinas Pliego should already know something about the company he has a 28% stake in, but he’s still taking his time looking into the details according to his spokesman. The Mexican retail and media mogul may or may not be one of the alleged parties however, as Circuit City isn’t providing any details.
The fact that they have two interested parties is a good sign, but that doesn’t mean Circuit City’s Salvation is by any means guaranteed. It’s dire straits make it an attractive bargain, but its poorly-run business model and the costs required to clean up the mess don’t add up favorably.
So far, the company has both liquidated and closed 155 stores in the U.S. over the last two months, and could begin auction off remaining portions and assets this coming Tuesday.
Friday, January 9, 2009 — by Jeannette Di Louie, Assistant Editor of Mt. Vernon Research
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