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Circuit City to Shutter Stores in Effort to Boost Financial Performance

Associated Press
Published | Updated

RICHMOND, Va. – Circuit City Stores Inc. (CC), the nation's No. 2 consumer electronics retailer, said Thursday it plans to close seven domestic Superstores, a distribution center and 62 company-owned stores overseas to cut costs and improve its financial performance.

The closings will take place over the next six months at an expected total cost of $85 million to $105 million, all to be incurred in the current fourth fiscal quarter, Circuit City said.

"Because of the intensified gross margin pressures that we saw in the third quarter within the flat panel television category, we launched efforts to accelerate the timing of planned initiatives to improve sales and gross margin, as well as improve the efficiency of our expense structure," chief executive Philip J. Schoonover said in a statement.

Circuit City operates through 643 Superstores and 12 other locations in 158 U.S. markets. The international segment has more than 800 retail stores and dealer outlets in Canada. The company also sells it products online.

The retailer, second behind Best Buy Inc. (BBY), also is realigning its management structure. It named a new merchandising officer, David L. Mathews, who replaces Douglas T. Moore, executive vice president and chief merchandising officer. Mathews will be head of merchandising, marketing, services and supply chains. George D. Clark Jr. will lead Circuit City's retail channels.

The seven domestic Superstores slated to close by the end of February generated $71 million in revenue in 2006. Separately, one Superstore will be closed this month in advance of opening a replacement store in the first fiscal quarter of 2008.

The company also plans to close a distribution center located in Louisville, used primarily for store fixtures and signage. A separate distribution facility there primarily used to distribute entertainment software will remain open.

Circuit City's international segment plans to close approximately 62 underperforming company-owned stores. It previously announced that it would return 92 Rogers Plus stores to Rogers Wireless Inc. The international segment also expects to incur costs related to plans to exit product lines and otherwise match up its merchandise with consumer demand.