phil'spal

Circuit City Still for Sale - Who'll Buy It?

Sullivan is right. Too much hassle involved with making an offer. Further, there is even more hassle in trying to make something of it once you have it. That leads to the obvious question: "What's left of any value in this company?" Bill is right. Fundamentals stink. Land and lease costs are crushing them, yet they're still talking about opening new stores. Not a logical strategy when the only bright spot in the story seems to be that their website is getting more hits lately. Trying to build market share by spreading yourself thinner is an interesting strategy. Given the pathetic performance over the last several quarters, does anybody know how they're planning to pay their suppliers? More debt? So much for cutting costs, unless interest expense somehow doesnt count. Or is the escape plan already in place where the creditors take the thrashing? It's the worst company in a tough, highly competitive market in a scary economy. With regrets to the few dozen or so remaining loyal customers and irrepresibly optimistic CC investors, there is no redeeming aspect that makes this company appear to be worth salvaging. If Mr. Marcum can turn this one around, he should be knighted, sainted, worshipped and adored for time eternal. But I kinda think that he'll settle for the few million bucks he gets for trying.

Circuit City: Outlook Is Grimmer Than Ever

What started as a mild but morbid curiosity with Circuit City's situation has developed into a morbid fascination for me. The more research I do, the bleaker, surer and more deserved seems the probable outcome. Corporations in general tend lately to describe themselves as 'nimble'. Circuit City's management has demonstrated that attribute to the extent that they have brilliantly managed to sidestep or dodge just about every opportunity that got anywhere close to them (eg. Wattles, BlockBuster, Carlos Slim). The most audacious example so far was paying lip service to BlockBuster's offer but refusing to open the books for due diligence. Heaven forbid that they find out what they're buying! Controlling payroll cost is a good idea! Decimating the most skilled and experienced top echelon of your sales force transforms that good idea into a fundamental business blunder. Fortunately, it looks like nobody at the brainstorming session tumbled to the idea that if they sacked EVERYBODY, they wouldn't have to worry about payroll expense at all. Woohoo! More wiggle room for those management bonuses! Increasing sales is a good idea. The idea of opening a bunch of new stores and thinning out your already pillaged store staff across your expanding empire might not be the best execution of that concept. Building them close to competing BestBuy stores is not a tribute to their confidence in going toe-to-toe in good old fashioned competition. They've almost perfected the fine art of squandering market share. As a final stroke of strategic genius, when they give their customer a ride to the BestBuy to make the purchase, they won't have as far to go. Their skill, or lack thereof, at store selection is already evident in the number of unprofitable locations that are crushing them with poor performance and long term, iron-clad lease commitments. Approaching the endgame, shelving the planned distribution center and axing the stock dividend is final recognition that there's nothing left. Shareholders at this point, are holding out for 3 or 4 cents of their invested dollar. Employees, if they're smart, have their resumes in order. A wise chef once said: 'you can't make chicken salad out of chicken sh*t.' It is noble at this point to talk about turnaround, but in Circuit City's case, a more fitting term would be quixotic.