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
