Circuit City's Liquidation: Schoonover Could Have Saved It but Didn't

Jan.18.09 | About: Circuit City (CCTYQ)

35,000 folks will lose their jobs..they can thank former CEO Phil Schoonover. What is sad is that it did not have to happen, there were many opportunities to save it. What Schoonover did should be criminal.....

The News:

Circuit City Stores Inc. says it has reached an agreement with liquidators to sell the merchandise in its 567 U.S. stores after failing to find a buyer or a refinancing deal.

The second-biggest electronics retailer in the nation says in court papers it has appointed Great American Group LLC, Hudson Capital Partners LLC, SB Capital Group LLC and Tiger Capital Group LLC as liquidators.

Calls to the Richmond, Va.-based company and the liquidators were not immediately returned.

Circuit City filed for Chapter 11 bankruptcy protection in November. U.S. Bankruptcy Judge Kevin Huennekens gave the company permission to liquidate if a buyout was not achieved.

In June of 2007 I said:

As a trade, any good news could vault shares up immediately. But, I do not see the conditions that could create that good news anytime soon. Maybe they could get bought out and that would cause shares to jump, but, I am reluctant to invest on the prayer someone rescues them. An Eddie Lampert, based on past history would just be as likely to wait for these buffoons to run it into bankruptcy and buy it there even cheaper than now. Why pay a premium to the current price when in bankruptcy he could get it for a fraction of it?

At their current rate CC will be out of cash before Thanksgiving and then the fun really starts. This assumes they do not start ramping up debt to pay for operations and also assumes no further economic slowdown. Should the economy slide even more, see ya...

Then CEO Schoonover then fired good employees to save costs causing sales to plummet, ramped up debt, lowered bonus levels for his hand picked executives, Spurned a possible takeover, spurned an official offer from Blockbuster (BBI), was actually interviewed by the WSJ about "how to execute a turnaround", tried some new platforms and had one of the most visited web site during the 2007 holiday season but due to high prices could not convert them to sales.

This news is the result....sad for those losing jobs.

Disclosure: None