Friday, January 16, 2009

Circuit City shutdown is hint of things to come

The shutdown of the Circuit City consumer electronics chain may have come as a shock to its employees and customers, but it's something that U.S. consumers will be getting used to in the coming years. The closure of the 567-store chain, the nation's second-largest, will begin with going-out-of-business sales on Saturday and last until the end of March, unless the merchandise is sold earlier, according to the New York Times. But the death of Circuit City and the 34,000 layoffs that will come with it will not solve the country's economic problems. Rather, the closure is just another casualty of the credit crisis caused by Wall Street run amok, when lending companies ran up a nearly incalculable debt by convincing government regulators to allow debt to be used as collateral for new loans. Circuit City filed for bankruptcy in November and tried to reorganize, but was unable to reach a deal with as many as two interested suitors, the Times said. “We are extremely disappointed by this outcome,” said James A. Marcum, acting president and chief executive of the 60-year-old company. But Circuit City is far from alone, joining retailers Sharper Image, Mervyn's, Linens 'n Things and Boscov's, which filed for bankruptcy last year, and Goody's Family Clothing and Gottschalks, which filed this year. Many more retailer bankruptcy filings are expected this year, the Times said. More bankruptcy means more layoffs and layoffs mean less people able to buy big-ticket items, translating to more bankruptcies. Best Buy is now the biggest electronics retailer in the United States, with it and Wal-Mart expected to pick up most of Circuit City's business, the Times said.

No comments: