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Wednesday, November 4, 
6:52 am

Will vice chair appointment re-energize Circuit City auction?

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Activist investor Mark Wattles of Wattles Capital Management LLC, who has been pressing a Circuit City Stores Inc. sale since the beginning of this year, has a minor victory under his belt, as James Marcum, a member of his nominated three-person board slate, has risen to the ranks of vice chairman of the retailer. But, will Marcum use his newfound role to help drive a sale of the ailing retailer?

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Circuit City sale talk has subsided since Blockbuster Inc. in July pulled the plug on its $1.3 billion bid for the electronics retailer. Carl Icahn has also been quiet since Blockbuster backed out, despite having said in late April that he would acquire Circuit City himself if Blockbuster was unable to finance a takeover or obtain shareholder approvals.

Marcum, a turnaround pro as an operating partner at privately held merchant bank Tri-Artisan Capital Partners LLC, was assigned to the role to lead "efforts to accelerate the pace of the company's turnaround," according to a company press release issued on Tuesday. Turnaround aside, later in the release Philip Schoonover, chairman, president and CEO, said "the board continues to pursue strategic alternatives for the company that offer the best possible results for our shareholders in the long term." This pursuit of strategic alternatives was kicked off in May, when the company announced it had hired Goldman, Sachs & Co.

What more can Circuit City try to do to right its ship on a standalone basis? The retailer initiated a turnaround plan about a year-and-a-half ago, when it laid off about 3,400 of its highest-paid and most-experienced floor employees in hopes of replacing or rehiring them at lower wages. Some analysts and observers said the plan was disastrous from a customer service standpoint. "Disastrous" is a good word to describe the company's bottom- and top-line performance. In the first quarter ended May 31, Circuit City suffered a nearly $165 million loss, versus a roughly $54.6 million loss for the year-ago period. Sales for the quarter came in at about $2.3 billion, compared with nearly $2.5 billion for the same period a year ago.

The only thing Circuit City leadership might be able to do right now is keep at its turnaround efforts and pray for strong holiday sales to possibly bring share prices back up to respectable levels. Either that or the company can just lament not taking up Highfields Capital Management LP on its $17 per share buyout offer in 2005 or Carlos Slim Helú on his $8 per share offer in 2003, while shares now hover below $2. - Michael Rudnick





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