phil'spal

Circuit City Falls Further: 'Bring Out Your Dead'

bill

a flat screen tv for 199 bucks? hmmmm....how's this for messing with your perspective on that one? .... for anybody still holding CC shares, they'd have to sell about 600 shares to afford one, but only if they act quickly.

Circuit City Falls Further: 'Bring Out Your Dead'

thanks bill

that article explains in a bit better detail. so, let me get this straight. they're trying to raise $350MM. their LOC is either used up or collapsed. they're looking for DIP financing.... so chapter 11 looks like a foregone conclusion. that brings us back to our earlier conversations about the 'when'. i'm wondering if they can liquidate that much inventory that quickly. if they cant, they wont even make it to the end of the year and they'd be facing a total closure while in chapter 11. perhaps even sooner than we'd expected. after CC closes 150 stores, how willing are landlords going to be to renegotiate remaining leases with a company that's as shaky as CC? what is this going to do for the staff (what's left of them) morale and level of customer service offered from here on? what is their inventory fill/mix going to look like for the rest of the year? and possibly last but certainly not least.... how is the board going to wangle their severance packages out of the wreckage?

Circuit City Falls Further: 'Bring Out Your Dead'

thousands more layoffs and at least 150 store closings being 'considered'.

(seekingalpha.com/artic...)

the reason given? alternative to filing for bankruptcy protection before the holiday season. "it might cause customers to doubt its ability to provide warranties. " oh, please. is there a customer out there that's stupid enough to think that if they make it to the new year that everything will be just fine? closer to the truth, it's what they have to do to remain liquid enough to operate and sell down for another 60-70 days. warranties and customer perception are the least of their concerns.back to the boat analogy: "all hands on deck!" now followed by "firing squad at the ready!"

Circuit City Falls Further: 'Bring Out Your Dead'

bill:

yes, i remember that. i had a look at the article. history tends to repeat itself, and with the same consultants on the case here, i was struck by how ominously parallel mervyn's and CC's stories are unfolding. does this quote have any resonance here?... "(the company) proved unable to gain any traction on its turnaround efforts.The company had struggled in recent years, squeezed at the bottom by retailers like Wal-Mart (NYSE: WMT)..." if that one isnt prescient and foreboding enough for you, try this one on!... “We are disappointed with this outcome, but the company’s declining liquidity position and the extremely challenging retail environment, together with the fact that we’ve exhausted all other possibilities, requires that we take this action,”

in the interest of making CC's job a little easier in the new year, i offer them one suggestion ..... "copy and paste".

Circuit City Falls Further: 'Bring Out Your Dead'

bill:

Costa Rica? yeah, they're taking a page out of AIG's playbook! it's working out real well for them too! i think that with all the brainstorming we've been doing here, it would be a nice gesture on their part to invite us along on the trip!

last time i looked, CC is at 40 cents. that's up 3 cents! if that price holds to the end of the day, i'll be looking for the press release from CC pointing out that the 'turnaround' is already a resounding success! that way they can call it an incentive trip or a performance bonus.

Circuit City Falls Further: 'Bring Out Your Dead'

CanadaD:

Are they actually new stores, or are they corporate replacement stores in locations that were vacated (for one reason or another) by a dealer? are they new locations or are they new postings for established stores? i couldnt tell from the website.

new openings can take a fair bit of time from start to finish. they may have been past the point of no return by the time their crisis was recognized and acknowleged so they had to follow those through to completion. same story with fixtures. there's a lead time from order to installation, and furniture and fixtures are usually planned for and built for several stores at a time to keep the costs down through the purchasing of larger lots. also, because intertan is doing relatively better than the parent company, they may be held to more generous budgetary rules than the rest of CC. as a bit of an aside, i THINK i recall in their loan repayment documents, a clause stipulating that canadian debts be satisfied before those in the US were paid.

as you rightly point out, freshening the look of a store can be done for minimal cost. they need signage anyway. new theme or format is an easy adjustment. poo filters down, so if the district managers got yelled at, they turned around and yelled at the store managers. presto! tidy stores!

they made no bones about it. they've been looking to sell intertan off for over a year now. it's really the only salable asset of any value that they can sell without a complete corporate restructure. if they have a buyer, they want it to look shiny and sparkly i dont think they do, but if one does exist (Radio Shack would be my odds-on favorite), any prospective buyer would know that they'll be able to cop a much better deal after CC's funeral. i believe that intertan has a fair bit of autonomy over their overall store cosmetics. cleaning up the stores' appearance is just basic responsible management and part of the usual pre-christmas pep-talk rally. after all, if CC has to tell intertan to clean up their stores, wouldnt that be like a toad calling a frog ugly?

Circuit City Falls Further: 'Bring Out Your Dead'

great analysis bill!

you're probably right in the park with those rates that you worked up. your projections are back-up for what i've been figuring all along... that the great unwind would likely happen sometime early in the new year. The finance guy should consider a trip to Office Depot to exchange all of the black pencils for red ones.

Circuit City Falls Further: 'Bring Out Your Dead'

bill:

now that i see where you come from, it makes sense. your explanation reinforces the 'house of cards' analogy... and the leaky boat analogy. but don't miss the canasta tournament on the lido deck!

Circuit City Falls Further: 'Bring Out Your Dead'

bill:

i wish i had your nose for details. the deal is almost surely much worse than AIG's simply because they really had nothing in the way of a bargaining position. (unless that position was on their knees with palms outstretched). matter of fact, i'd be regarding it as charity at this point rather than as a loan. with the drop in the share price since the loan was made, their market cap tanked accordingly ($62MM +/- today). their balance sheet and other vitals like debt/equity ratio are gonna look downright scary. i suspect that the precise rate they're paying is the least of their worries. toss in the anticipated YOY drop in sales and their financials will be completely pillaged.

Circuit City Falls Further: 'Bring Out Your Dead'

bill:

on 100 posts:

CC must be giddy with excitement at getting this much attention.

on one price pricing:

i saw the press release yesterday. i thought it was kinda like the elephant man putting on a brightly colored bowtie so you wouldnt notice the rest of him.

Circuit City Falls Further: 'Bring Out Your Dead'

oops!!! 1%! hahaha still.... not too bad at all

Circuit City Falls Further: 'Bring Out Your Dead'

bill:

thanks for the links! i got the answer to my question when he estimated CC's closing would add 37 cents/share to earnings. that's 10%+ of his 12 mo. target. that's huge, man!

Circuit City Falls Further: 'Bring Out Your Dead'

bill:

re: analyst upgrade of BBY

it would be interesting to find out how much of a bump his target price got from CC's declining ability to compete in the market. if he upgraded BBY, he obviously wasnt penalizing BBY for being in the same sector as CC or citing CC's non performance as a sign of overall sector weakness.

Circuit City Falls Further: 'Bring Out Your Dead'

thanks for the pep talk, bill. and yes, that's the plan.

Circuit City Falls Further: 'Bring Out Your Dead'

bill:

about defaults and the housing crisis, i remember one saying. (i forget who said it, so ben franklin or mark twain will eventually get credit for it)

"There are 2 kinds of fools. Them that offer and them that refuse."