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 Is the electronics retail sector under siege? First Sharper Image Corp. filed for bankruptcy, and now it looks like Tweeter Home Entertainment Group Inc., which only recently emerged from bankruptcy, is liquidating its remaining 100 stores. Meanwhile, larger rival Circuit City Stores Inc. is closing 155 stores ahead of the holidays, further fueling speculation that the Richmond, Va.-based chain could be the next in line.
Canton, Mass.-based Tweeter, which operates about 100 stores mostly on the East Coast, reportedly has been purchased by liquidators Hudson Capital Partners and Tiger Capital, which will shut down the stores in the next four to six weeks, according to The Boston Globe. Tweeter evidently closed its distribution centers last week, according to trade publication This Week In Consumer Electronics. Tweeter's liquidation resembles last year's closure of CompUSA Management Co. Tweeter's circumstances could be a preview of what's to come for Circuit City. Dealscape reported last month that Circuit City was drawing up a restructuring plan, and now the electronics retailer announced it is shutting 155 stores. Circuit City will begin store closing sales by Nov. 5, and they are to be completed by Dec. 31. Additionally, Circuit City is reducing future store openings and also renegotiating leases as part of a comprehensive restructuring. The retailer also announced it is considering all options and alternatives for restructuring -- code for bankruptcy is still in the cards. The real question is: Can it avoid bankruptcy? Circuit City has taken a hit due to waning consumer confidence and the economic downturn, leaving some of Circuit City's vendors "to take restrictive actions with respect to payment terms and the credit they make available to the company," including payment before shipment and limiting credit lines for the company. Sound familiar? Suppliers forced the same restrictions on clothing retailer Steve and Barry's LLC before it filed for Chapter 11 bankruptcy protection earlier this year. To make matters worse, the company also says it is unable to collect an income tax refund of approximately $80 million from the federal government. That's a paltry sum for a struggling company. Activist investor Mark Wattles, who controls a 6.5% stake in the company and was all for selling Circuit City to Blockbuster Inc., must be shaking his head. But he did get his way, booting out CEO Philip Schoonover to get his board member James Marcum to serve as acting president and chief executive officer. Let's hope Wattle's and Marcum have a plan to resurrect Circuit City before investors, vendors and creditors pull the plug. - Maria Woehr
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Does anyone remember that Circuit City, just a few years ago, was the best performing company in Jim Collins' book "Good to Great"? Obviously, Mr. Collins' approach to management is worth some reconsideration given the fall of Circuit City. It would seem a new approach to management would be worth considering. Read more at http://www.ThePhoenixPrinciple.com