Circuit City's Layoff-Based Restructuring Plan Impresses Investors

Circuit City (CC) announced a restructuring plan yesterday that has the stock on the rise. At the heart of the plan is the lay off of 3,400 “store associates,” with focus on staff “who were paid well above the market-based salary range for their role.”

The company said it will hire new staff for those positions “compensated at the current market range for the job.”

OK, I know the consumer electronics business can be a rough market, but doesn’t this strike you as kind of creepy? Fire the highest paid workers, and replace them with cheaper ones? Now, maybe to a certain degree I’m thinking, I hope Dow Jones doesn’t think that would be a good way to run a news operation. But at another level, I’m thinking, I wonder whether firing your best salespeople - I presume they became higher paid in part by being good at what they do - will really be a smart move in the long run.

The company also cut a deal with IBM (IBM) to outsource its IT infrastructure operations, which will result in 50 employees moving to IBM and 80 more losing their jobs. It also plans to explore alternatives for InterTAN, its Canadian retail unit.

Circuit City also said it now sees fiscal 2007 sales growth of 8%, down from previous guidance of 9%-10% growth, with domestic comp store sales growth of 6%, down from 7% to 8%.

Circuit City yesterday was up 39 cents at $19.27.

CC 1-yr chart

Comments

[Sr. Pessimist:]

Well cool. I know some of those guys over at Circuit City. These are splendid workers. The labor market itself is ripe for an effective penetration. What if somebody actually paid good workers good money for doing the good work they did INSTEAD OF underpaying them by so much they can't afford to live and giving all the money to subhuman investors and the idiots in the corporate office? That would mean the workers could work in dignity and realize the fulfilling reward of a job well done. Then they'll do more well-done jobs. Novel idea? No. It's a non-greedy idea. I'm not greedy. Many rich people are greedy. The reason they are greedy is because they are as desperate as they are pathetic. Without whatever circumstance they greedily cling onto, greedy people lose everything they have going for them. A more generous guy like myself has no problem sharing, because there's plenty, plenty more where that came from- his merit. I am fearless because of my merit. I can always fall back on my merit. So I'll just keep taking risks and sharing. Without merit, you have limited options, and you are best to viciously fight off others with a disgusting air of greed so you can continue to survive on your one beneficial circumstance.

2007 Mar 29 12:00 PM

[avapcat:]

My dear friends. It''s not Circuit City''s fault for their actions. It''s hard to be responsible for actions if you haven''t got a backbone. For the last 6-7 years the brain trust at that company refuses to step up to the plate with their own ideas. All that money they pay procurement, marketing, and advertising is a waste if all they''re going to do is copy Best Buy. I''m surprised they haven''t ordered the blue shirts yet.

2007 Apr 02 10:56 PM