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Today marks the official death of Circuit City Stores, Inc. All hopes of reviving or saving all or part of the company are gone. The company is now officially seeking approval from the U.S. Bankruptcy Court to liquidate its assets. We held little to no hope for Circuit City for some time. There were many problems at Circuit City not seen at other failed retailers.
Posts for Ticker ‘CC’
Circuit City’s Hari Kari
Media Digest 11/11/2008 Reuters, WSJ, NYTimes, FT, Bloomberg
According to Reuters, a weakening economy in China and poor US earnings are causing concern that the recession will be deep and long.
Reuters writes that Vodafone (VOD) cuts its full-year revenue forecast.
Reuters writes that the Fed approved American Express’s (AXP) application to become a commercial bank.
The 52-Week Low Club (GM)(C)(GS)(EBAY)(NT)(CC)(NYT)(TSCM)
GM (GM) plunges on concerns about Chapter 11. Falls to $3.02 from 52-week high of $32.80.
Citigroup (C) get caught in fears that big financials will have to raise more money. Sells down to $11.05 from 52-week high of $37.50.
Goldman (GS) gets pushed down on same fears. Dips to $68.51 from 52-week high of $240.05.
Ebay (EBAY) shows the internet and e-commerce are not escaping the recession. Runs off to $13.38 from 52-week high of $35.12.
Nortel (NT) announced big losses and big job cuts. Moves down to $.90 from 52-week high of $19.42.
Circuit City (CC) goes bankrupt and falls to $.11 from 52-week high of $8.24.
The New York Times (NYT) takes big write-offs from falling value of assets. Drops to $8.62 from 52-week high of $21.14
TheStreet.com (TSCM) still dropping for a poor quarter. Sells off to $3.35 from 52-week high of $16.74. May be time to go private.
Douglas A. McIntyre
When Does Sirius (SIRI) Follow Circuit City (CC) And GM (GM) To The Bottom?
Circuit City (CC) and GM (GM) have effectively proved a point about the current economy and credit markets. Without substantial positive cash flow and operating earnings, raising money is nearly impossible. Corporations which already have a large amount of debt on their balance sheets are particularly unlikely to find financing.
Earlier today Circuit City filed Chapter 11 and GM’s share price target was dropped to zero by Deutsche Bank. The nation’s largest car company will either run low on money early next year or be forced to raise money in a fashion that will wipe out common shareholders.
The news from the consumer electronics and car companies pushed CC shares as low as $.11 against a 52-week high of $8.24 and GM’s down to $3.02 against its 52-week high of $32.80.
The question is which well-known US company will be next into the credit gauntlet. The answer is that it will probably be Sirius XM (SIRI).
Circuit City (CC) Files For Chapter 11
What more is there to say?
Douglas A. McIntyre
Circuit City (CC) Fires Hundreds Of Headquarters Staff
In addition to the nearly 7,000 people who lost jobs when Circuit City (CC) closed 155 stores last week, almost 800 people who work at the company headquarters in Henrico, near Richmond, are now out of work.
At the rate things are going at the electronics retailer, everyone at the firm will be unemployed by Christmas.
Store Closings Aside: Circuit City (CC) Can’t Make It To 2009
Today’s financial news headlines and stories are about how Circuit City (CC) is closing 155 stores in the hope of staying in business.
The real story is in the fine print. Based on the current retail environment CC is unlikely to make it to 2009 without filing Chapter 11. The company’s shares may be up 57% today, but they still only trade at $.40.
Amazon (AMZN): The Last Big Hope For Consumers This Earnings Season
Amazon (AMZN) has two huge advantages as a retailer. The first is that it has no stores. The other is that it has an astonishingly large list of things it sells from TVs to books to consumer electronics and jewelry.
If Amazon’s forecast for the fourth quarter had been relatively strong, or even benign, Wall St. might have been able to believe that the consumer was not dead and buried. If people were going to buy things for the holidays, cheap prices and free shipping would bring them into the market.
Circuit City (CC): A Chapter 11 Or Just Massive Cuts?
The Wall Street Journal reports that Circuit City (CC) is finally addressing just how desperate its situation is. The company is reportedly considering a plan to close 150 stores and slash jobs in an effort to save the company. But the company has also hired bankruptcy attorneys Skadden, Arps, Slate, Meagher & Flom LLP and other consultants as it mulls a possible bankruptcy filing and plans for the possibility of debtor in possession financing
Media Digest 10/20/2008
According to Reuters, a number of retailers are cutting back holiday hiring as they anticipate lower sales.
Reuters reports that GM’s (GM) interest in Chrysler’s cash is helping move a merger forward.
Reuters reports that ING got money from the Dutch government and sold its Asia operations.
Companies Hit Hardest By Credit Crisis (AAPL)(SIRI)(CC)(DIS)(WMT)(MCD)
Updated: 31 October 2008
Not all companies and industries will be hit equally hard by the consumer credit crisis. Operations such as Procter & Gamble (PG), McDonald’s (MCD), and Wal-Mart (WMT) may be safe. They either sell things people can’t do without or offer inexpensive goods and services that consumers can afford during a tough period. McDonald’s reported earnings today and its same-store sales were up in every region.The stock traded up on a day when the overall market was swamped by selling.
If the credit crisis gets substantially worse and only the most stable companies with the highest credit ratings have access to cash, some will not be able to maintain inventory. Other firms will be affected because their target consumers no longer have any discretionary income. The head of AutoNation (AN), the largest car dealer chain in the US, said that even his prime customers cannot get bank loans for new cars in many cases. "The banks are looking for every excuse possible to say no and they are saying no to good customers," Reuters quotes him as saying.
Neither set of companies has a bright future, but the ones who cannot finance their operations and inventories face almost immediate consequences
Where Is The Fed When It is Needed?
It is time for Ben Bernanke to descend from Mount Olympus and join the Croesus of the administration, Henry Paulson, in the the trenches, or the tranches, depending on your perspective.
Late word is that the Fed may cut interest rates. Up until recently, the odds for that were long. But, the credit crisis has deepened during the past few days. People cannot borrow a dollar for a cup of coffee and small banks are not giving car loans.
The 52-Week Low Club 9/30/2008 (HIG)(CC)(RRI)(APPA)
Hartford Finl Svcs (HIG) Downgraded due to exposure to debt at troubled financial firms. Drops to $31.26 from 52-week high of $99.21.
Circuit City Stores (CC) The end is near. Hard to see how the retailer hangs on. Drops to $.72 from 52-week high of $9.65.
Reliant Energy (RRI) Cuts outlook and needs to raise capital. Down to $4.69 from 52-week high of $28.74.
Ap Pharma (APPA) Drug trial fails. Drops to $.63 from 52-week high of $2.35.
Douglas A. McIntyre
Media Digest 9/30/2008 Reuters, WSJ, NYTimes, FT, Bloomberg
According to Reuters, the credit crisis has sharply increased the chances of a deep recession.
Reuters reports that the fall in the stock market is pushing investors into safe investments like Treasuries.
Reuters reports that a freeze up in money markets may cause a rate cut.
Circuit City (CC) Falls Off The Earth As CEO Leaves
Circuit City (CC) sacked the CEO who ran the company for the past four years. Philip Schoonover held every important job at the retailer from chairman to CEO to president. He was ejected because the fortunes of the electronics retailer have continued to fall. The company’s shares trade below $2. Their 52-week high was more than $9.
At its core, the problem that Schoonover faced was that Circuit City could not be fixed. He was on a fool’s errand and was paid well for the pursuit.
In A Moment Of Optimism Retailers Say Holiday Sales Will Be Bad (WMT)(SHLD)(CC)
Hope is a fine human emotion until it moves to lunacy. A psychosis of optimism has seized the retail industry. The National Retail Federation says that sales will rise only 2.2% this holiday season. That would make it the worst year in the last six.
According to Reuters, research firm TNS Retail Forward sees holiday sales falling to a 17-year low. Neither forecast bothers to look back to the early 1980s recession or the deep economic malaise of 1973 and 1974.
Media Digest 9/23/2008 Reuters, WSJ, NYTimes, FT, Bloomberg
According to Reuters, Wilbur Ross say the bailout package does not address the core of problem which is mortgage payments.
Reuters writes that the National Retail Federation says that this will be the worst holiday season in at least six years.
Reuters reports that the head of Caterpillar (CAT) says that the financial crisis has not hurt the company’s financial arm.
A Dozen Companies Which Should Lay-Off 10,000 People This Year
The evidence that sales at many companies are struggling and that employment will suffer are almost everywhere. Recently, a division of GMAC said it would let 5,000 people go. According to MSNBC, "Job cuts announced by U.S. employers last month jumped 12 percent over a year ago to cap the busiest summer of downsizing in six years." Job cuts through October could top what they were for all of 2007.
The economy is beginning to look like it did during the deep recessions in the early 1990s and 1973. Eric Rosengren, the president of the Boston Federal Reserve Bank, sees the situation getting much darker in the second half. Speaking of deteriorating financial conditions he said, "It may push the unemployment rate up to 6%, with more than 2 million people losing their jobs since the financial turmoil began last summer.".
The 52-Week Low Club 8/20/2008 (FNM)(FRE)(MNI)(CC)(NVTL)
Fannie Mae (FNM) Fear the mortgage firm will fail. Drops to $3.95 from 52-week high of $70.57.
Freddie Mac (FRE) Ditto. Sells down to $2.95 from 52-week high of $67.20.
McClatchy Newspapers (MNI) Newspaper firm turns in bad July ad revenue. Drops to $3.53 from 52-week high of $23.58.
Circuit City (CC) Market does not think retailer can find a buyer. Dips to $1.63 from 52-week high of $11.55.
Novatel Wireless (NVTL) Turns in a bad quarter. Collapses to $6.05 from 52-week high of $27.20.
Douglas A. McIntyre
Circuit City’s Turnaround Expert Still Under Schoonover, Big Mistake (CC)
Circuit City Stores, Inc. (NYSE: CC – News) has appointed director James A. Marcum as vice chairman of the company. In this new position, Marcum is expected to play a key role in leading the company’s turnaround. He will work with Philip Schoonover, President, CEO, and Chairman. The good news is that Marcum is deemed a turnaround manager. The bad news is that he is still under Schoonover, whom we named and still have as one of the top CEO’s that need to go.
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