Quickdraw

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

Regarding your observations on Todd Sulivan's comments about Phil ... I think your term 'hate' is a bit harsh. I believe 'contempt' would work here ...

Phil would have loved to reap the kudos, if there were any. He was certainly in position long enough to effect change at Circuit. Phil is a moron who was 'way over his head' at BBY, and got out while short-term results said otherwise. His short-sightedness was eclipsed only by his own sense of self-importance. Circuit didn't just make a handful of mistakes and then have their luck fail also; they were soooooooo far behind in the great retail race, from their perpective they thought they were ahead. Todd Sullivan was correct to predict that the only viable option for any prospective buyer, would be to let 'em die and pick the bones.

We will only hope to imagine if poor 'ole Phil is being hit hard, like the other 34,000 employees. We will more likely imagine him sitting on the beach, drinking something wonderful out of a pineapple.


On Jan 19 09:43 AM CC guru wrote:

> Another poorly written article by Todd Sullivan. I have no clue why
> this guy hates Schoonover so much. Did Schoonover do a poor job?
> Yes. Did Schoonover have the experience for the helm? No. Did Schoonover
> get involved with a company that had countless problems that kept
> getting swept under the rug way before his time so when he came into
> the position he inherited them. Most definitely. While Schoonover
> did make some bad calls, I think we need to also point the finger
> at 10 years of bad management. Oh and if you read this Todd, spurning
> a deal from Blockbuster actually isn't a bad thing. Blockbuster is
> the next major retail to go under. Good luck to all the CC employees
> and anyone else who is in a position within another company that
> is now unemployed.

Circuit City: Closing Time

Finally ... the trapdoor has sprung. Unfortunate for the 30,000 employees, but healthy for the marketplace. The company who became the poster child for 'the wrong way to do business' is validating our faith in Darwin's Theory, as it might pertain to retail.

This story is less about the economy, than it is about Circuit's own shortcomings. I am certain we will all hear about "the good employees who lost their jobs, through no fault of their own" ... history will record Circuit's epitaph very simply. When you sell products that can all be bought elsewhere at the same price, and you suck at virtually every aspect of operations and customer service, then you hang.

Red Friday: Coming to a Mall Near You

To billdrummer

Amen ... as I've said elsewhere, you should be in a good place.

Red Friday: Coming to a Mall Near You

The impact of Circuit City's demise will affect more than just the recently suggested 150 locations. Rumor has it, that Sony is the first of Circuit City's nervous vendors to pull the plug. On Thursday, all Sony trucks destined for CC were told to turn around, and return to Sony with their loads. With such a dominant supplier making that decision, all others will quickly do likewise.

The Red Friday fire sale will be happening at many hundreds of retail shopping areas, all over the U.S. and Canada.

Circuit City Doesn't Have Enough Cash to Declare Bankruptcy

Attention, Sports Fans! The End Game Begins ...

And just who will be the first vendor to blink, in the Circuit City bankruptcy games? The award goes to: Sony!!!

This 'little birdie' sat on my shoulder and told me some interesting news. All of the Sony trucks headed for CC were told Thursday, to turn around and head 'em back to Sony. No baloney ... Circuit gets no Sony. My 'little birdie' is always right.

As I stated previously, watch the house-of-cards fall quickly. All other vendors are scambling today to follow suit. The Fat Lady is hitting the crescendo.

And to billdrummer:

Yes, I too was struck by the number of people who were defending CC here, but I completely understand. Loyalty is an admirable trait, and is combined here with the personal feelings about one's job (and financial livelihood) that make it hard to be objective. My heart goes out to the thousands of employees who are about to receive some very bad news, at a most unfortunate time of the year for them and their families.

Circuit City Doesn't Have Enough Cash to Declare Bankruptcy

To billdrummer

I think its just you and me here, most of the time.

I hope the winds of retail blow softly in your favor this upcoming selling season. Unlike the subject of the blog-line, BBY's senior management team are smart people who almost always roll with the punches, and maximize opportunities. You should be in a good place.

Circuit City Doesn't Have Enough Cash to Declare Bankruptcy

To user 285454

Unless you're a power-player, senior management or board member type, then you won't be soliciting Mark for a position. If you were, then you'd already know how to find him.

Wattles enterprise is diversified. To name just a few examples: Waldo's Family Dollar in Mexico is a large endevour ... Manuel Clothing (exclusive designer western wear for the urban cowboy/cowgirl types) ... Firebird's restaurants (fine dining) ... and Ultimate Electronics (mid to upper-mid consumer electronics, appliances, and pool tables/home gaming accessories). Appliances and gaming are recent newcomers to that business plan, so it might be logical to expect a name change for that company sometime. Much of the time, a group of investor/management gurus run the empire under the name "Wattles Capital Management". The individual entities have their own tiers of management.

Your best route to any position would be to contact the Human Resources Director for the business that you find is your best fit, and go for it. You won't be interviewing with Mark Wattles.

Circuit City Doesn't Have Enough Cash to Declare Bankruptcy

To billdrummer

Mark Wattles is not a 'friend' of mine. Recently a business associate, only. I say what I've commented upon here, based on conversations and personal insight after enjoying considerable face time.

To Flatearth

You probably mean well, but are obviously underinformed.

Phil could be reaping the rewards for good decision-making ... if so, then he would be the first to accept the kudos. Instead, he piloted the trainwreck. Everybody gives him the negative credits due. Your view that he was not really in control is a limited vision.

Circuit City Doesn't Have Enough Cash to Declare Bankruptcy

Simple deal ... it bought him a major shareholder status ... it enabled him to replace three key board members with his people ... which gives him a disproportionate degree of control. There was considerable bad blood between him and Phil Schoonover, and we all know what happened there, right after the new board members arrived.

Mark spends $40-50 million on a big play like this, about as easily as we might decide what to order from a restaurant lunch menu.

I can't say how ... but I know Mark well personally.

Circuit City Doesn't Have Enough Cash to Declare Bankruptcy

With a total market cap of $34 million, it means that somebody like Wattles can write a check for the whole works ...

Circuit City Doesn't Have Enough Cash to Declare Bankruptcy

To billdrummer,

Thank you for the earlier compliment. Your own commentary is right on target.

Labor costs, as a concept, are totally disrespected at Circuit. Over the last 7 years I have observed instance upon instance of mismanagement of their people. The fat at corporate is mirrored by the waste at the store level. Today at Circuit stores everywhere, they have 'stocking teams' that restock product, set merchandising planograms, and build displays. These employees don't service guests or ring sales ... and the sales help is often forbidden to assist with the merchandising in any way, even though customer counts are dwindling and they stand idle most of their shift.

From the bottom, to the ivory tower, there's a culture of "That's not MY job."

About seven years ago Circuit changed the compensation plan for sales employees to an hourly model, rather than commission-based. The top performers (who also created the most revenue & profits for the company) were dismissed for 'making too much money'. The bottom feeders were shown the door ... a good move in any business ... and the middle were offered a low hourly wage. Since then there have been several ill-conceived initiatives that were designed to lower labor costs, but resulted in scuttling employee morale and becoming noncompetitive in the customer service arena.

Best Buy has only average customer service on a good day. Unfortunately for Circuit, average service always trumps poor-to-nonexistant service. The people who steer the ship there are sooooo far behind in the race for retail understanding, from where they are at it might appear to them, that they are ahead.

Latest case-in-point, hot off the cubicle-sitters think-tank: The One Price Promise. I suppose one of the geniuses there decided to retire the previous price promise ... "If You Catch Us in the Act of Screwing You, Then We'll Match Our Own Website."

Circuit City Doesn't Have Enough Cash to Declare Bankruptcy

Another timeless, true principle for the cubicle-sitters at Circuit ... "You cannot Save yourself out of a downturn." Closing stores at the onset of the holiday season is something akin to using a bailing bucket when your ship has a huge hole in it's belly.

It's too far away from shore to fix the hole at this point.

Blub, blub, blub, blub ...

If you take a tour through the hallways of the corporate offices in Virginia, you'll oserve layer after layer of redundancy. The keeper-of-the-pencils hands them to the sharpener ... who then sharpens them, and takes them down the hallway to the user-of-the-pencils ... who then decides to send the project to the person who uses the pen instead. Then, the keeper-of-the-pen must be summoned.

It's like watching a union railroad job; four or five people, watching one do the work. The new ownership will slice payrolls like the Grim Reaper and make the remaining few work harder.

Circuit City Doesn't Have Enough Cash to Declare Bankruptcy

When the 'Fat Lady' finishes singing ... enter, Mark Wattles. His aquisition of Ultimate Electronics was a good little practice run for the major-league game now looming.

Unlike the Ultimate takeover, where in hindsight Mark Wattles regretted the company's bankruptcy largely because it cost him a lot of extra loot to redeem the company's name, Wattles and his co-horts will definitely take Circuit down the tubes. Circuit City has a horrible reputation in all aspects of the retail business world ... their brand is so bad that it would be worth the millions required to change the name, if anybody wanted to pick up the pieces and rebuild that company. Circuit City didn't just have a short run of bad luck or a couple management errors. They have been the poster child for 'How Not to Do Business'.

Personally, I cannot wrap my mind around whatever a day in the life of a Warren Buffet or a Carl Icahn might look like. I can't imagine what their phone calls might sound like, etc. Phil Schoonover (Circuit's former, now departed CEO) on the other hand, gives us all a great deal of hope for our futures ... he is a complete moron, and rose to the top of a multi-billion $$$ company.

Circuit's hole is so deep, no rabbit can possibly jump out. Their balance sheet is redder than their storefronts. The bankers who have existing agreements with them are huddling in meetings, weighing the options. I predict they will decide to accept any penalties for bailing on their deals with Circuit, rather than go down with the ship. The vendors are in a quandary, because the orders for other retailer's holiday inventories were concluded weeks ago. If they pull the plug on Circuit's credit line, they have few alternative options for offloading their products. No sane, knowledgeable observer would suggest that Circuit will have even an average holiday season; but on the other hand, dismal sales beats zero sales. However, if even a single vendor blinks, the rest will follow like a house of cards falling.

Last year, Schultz Asset Management gave Circuit a transfusion to float 'em through the 4th quarter ... this year credit is a tighter scene for all, and so there won't be any manna from heaven for Circuit. (Even if there was, Wattle's henchmen will torpedo the deal, now that they are running the board.) Look for posturing among guys like Icahn and Keyes, expressing interest in ownership, to divert attention from Mark Wattles. They are his buddies, and they will pretend to be interested in Circuit, to ward off other possible suitors like Sears. Wattles' style is to pay pennies on the dollar for things, and here comes another fire sale. Bankruptcy is the best viable option for whoever wants to acquire Circuit, because they have made such a huge number of stupid decisions; the only timely way to back out of them would be to let the company die and then pick the meat off the bones.

Circuit City Falls Further: 'Bring Out Your Dead'

Lifeguards! Alert! We see the bubbles ... Somebody's drowning!

Maybe they're still only lying at this point. This morning I needed some good humor, so I re-read Bill Cimino's comment about how the board of directors are dedicated to preserving stockholder equity. Wow ...

After the gurgling stops, and the funeral for CC is held, perhaps he can go to work for one of the major political parties as a spokesperson. The magnitude of the spin he puts on concerning CC's current footing is second only to the degree exhibited by our politicians this season.

Truly outstanding stuff there, Bill! We suppose it's true that you can say just about anything, when it's your last week on the job.

Circuit City Falls Further: 'Bring Out Your Dead'

To billddrummer

A correct perspective and historical reference! I do predict that traffic-drivers in the video realm will see a margin bloodbath ... in anticipation of the 2009 digital conversion retailers will be ready to draw their guns at the competition's first blink. Possible profit havens such as Blu-ray will be sacrificed to the marketing gods as well ... even the sacred accessory categories like connectivity and mounting hardware will be offered up.

After all, there's no 'second place' in a gunfight ...

Interesting to note that in the the recent financial statements that CC's audio category business is way down. Gee, I wonder why? Shop for a decent home audio receiver at most stores, and you'll find the displays are non-functional. They don't even try. Hmmm ... there must not be any money in home audio, according to the cubicle-sitters who steer the company ship.

I do not believe that Circuit City will be a major contributor to the intensity of the fray during holiday season 2008. They will react in desperation, as you suggest, but moreso within the context of the drowning victim who clutches desperately at anything that appears to be above water. I don't think CC's pockets are deep enough to survive even a few bubbles ... All eyes should be focused upon Wall Mart ... they are the marketplace Goliath this year.