Mr. Schoonover joined the company in October 2004 as executive vice president and chief merchandising officer. He was elected president in February 2005, joined the board of directors in December 2005, was elected chief executive officer in March 2006 and was elected chairman of the board in June 2006.

Early in 2007, the company lost more confidence from Wall Street when the announcement came that its CFO was leaving the company.  It was also recently announced that David Mathews, EVP of merchandising, services and marketing was leaving his position to become president of Orchard Brands.  Losing your merchandising officer in Q4 ahead of the period after Christmas is not the greatest signal.  Schoonover’s turnaround team under him hasn’t stayed long enough to make a difference.

In a world where your technology customers might have no conscience, having too flexible of a return policy on high-end items isn’t a win.  Flat panel LCD or plasma TV seem to be priced lower and lower each month, and making it too easy for customers to return these hurt.  Firing the rest of your more tech-savvy salespeople and getting rid of your only advantage over rival Best Buy (NYSE:BBY) to go to a lower-paid hourly worker that doesn’t understand the technology as well was perhaps the dumbest attempt to save cash we’ve seen from any retailer all year.  Even though it has asked some workers to return, there is some pretty bad blood that management created.

If you will recall the company received a private equity bid at $17.00 per share in cash from Highfields Capital Management LP back on February 11, 2005.  Even if there wasn’t a private equity crunch and liquidity shortage right now to do deals, there is no way on earth that Highfields would come back with this price and they refused to chase the stock higher.  Circuit City shares actually rose after the buyout offer, although the cracks in the armor started appearing late last year and the cracks broke the armor apart and all that is left is an emperor who wears no clothes.  "Scoot-over" wasn’t the head of the entire show for the entire time but he’s been there long enough to do far more damage.  Mr. Schoonover probably wishes he had a fabled time machine to go back and fix this.

Even the potential InterTAN sale in Canada may not yield enough help here.  S&P has noted that this had one of the largest share price drops compared to prices paid for shares by the company itself during a share repurchase program.  The only thing that occasionally saves Circuit City stock down at such low share prices is the occasional takeover rumor.  We have reviewed this over and over for our Special Situations subscriber letter, but we have not been able to make ourselves see the light.  The earnings have been a disappointment and First Call shows a loss expected for Fiscal FEB-2008, so any would-be buyer today has to be a far better turnaround player rather than an enhancement team that can engineer a 12-month to 18-month flip.

A new CEO with a vision might actually be able to woo back some of the old employees.  Best Buy does roughly 3.5-times the revenues, yet its market cap of almost $22 Billion dwarfs that of Circuit City’s $1.25 Billion.  Analysts have all bailed on the stock, so even if it has recovered off recent lows you could expect a series of upgrades (or at least waves of more positive comments) from Wall Street if "Scoot-over" left or was forced to leave.

Based upon the low share price, the dismay for Schoonover, the gross mismatch in revenue multiple comparisons, the ability to spruce up the stores, the possibility of a new leader getting some workers back, and a dozen more factors…. 24/7 Wall St. feels that if Philip Schoonover would take our "Scoot-over" name to heart that Circuit City shares would potentially rise more than 10% IF he was simultaneously replaced with someone who could turn this around. 

Shares are up $2.00 from its recent lows, but it still looks dismal.  At $7.39, the 52-week trading range of $5.35 to $25.25 makes this party just less-dull.  Circuit City is regularly reviewed for our "10 Stocks Under $10" newsletter.

• GUIDELINES FOR OUR CEO SELECTION

Jon C. Ogg
December 6, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Does this mean Sears Holdings (NASDAQ:SHLD) would buy it, or is it just Eddie and backers?  We can’t say and frankly we don’t want to speculate on the odds of which is or isn’t true.  We have looked at this quite frequently for a BAIT SHOP pick as a potential takeover candidate (now our "Special Situation Investing Newsletter") but we have never been able to make the case for the value.  Since the company shot itself in the foot it now even potentially has a severe relevance issue (24/7′s view).

If anyone could add or find value in this electronics retailer it would be Lampert.  But there are certainly better fishing spots out there.

Jon C. Ogg
October 3, 2007

Jon Ogg produces the 24/7 Wall St. SPECIAL SITUATION INVESTING NEWSLETTER; he does not own securities in the companies he covers.

Best Buy (NYSE:BBY) has left competition like Circuit City (NYSE:CC) in the dust.  The company decided to sell more electronics farther away from the U.S.  The company does not have more exposure internationally than the U.S. but ambitions will go there to be 50/50 by 2010.  Cramer slammed Circuit City, just like we did last week.  Circuit City also hit today’s 52-week lows.  Best Buy still has $2.9 Billion left for share buybacks and is expanding in the U.K. and China.  The earnings warning on Lowe’s (NYSE:LOW) is going to pull this down tomorrow.

Jon C. Ogg
September 24, 2007

The company lost $62.8 million in the quarter, or -$0.38 EPS.  That was under the $0.06 reported last year.  Revenues were also down 6% to $2.64 Billion, and same-store-sales fell about 8%.  First Call had estimates at -$0.12 EPS and $2.78 Billion in revenues.

This was one we added to a "watch list" for a Bait Shop (buyout candidate) at the end of 2006 when cracks really started taking hold in the stock around $19.50 (new year low at that time too), and we revisited the "watch list" status again in April.  We were trying to see if there was going to be an implied floor since private equity was still on a buying binge, but we couldn’t get past the Circuit City woes.  But because of how the company killed its own business model we couldn’t find any reason whatsoever to be positive on this.  We still can’t.  In fact, Circuit City might even need to move its "Goodwill" from the asset side of its books to a new "ill-will" under the liabilities side of the books.

The problem is that Circuit City wrecked what was already somewhat a flawed or at least a tier-2 model.  This has never been a cool shopping spot, at least not in recent years, and it hasn’t had the buzz of a Best Buy (NYSE:BBY) store in longer than memory serves.  Go inside the stores back to back for a comparison and you’ll understand.  But then the company killed its only advantage: it fired its more tech-savvy floor workers to go for the cheaper per-hour flat rate worker.  Management thought salespeople were just numbers.  This will end up being a good university business school case study in the future about what not to do when you aren’t number one. 

Why it had the open and simple return policy for its flat screen LCD and Plasma TV’s is anyone’s guess, but it was another poor move.  Could you imagine car dealers taking a perfectly fine car back a couple months after they sold it?

If you will recall the company received a private equity bid at $17.00 per share in cash from Highfields Capital Management LP back on February 11, 2005.  That was back before private equity firms started buying companies as though they were playing a tycoon board game where everything down to the corner deli and the laundromat was deemed as attractive.  Circuit City ultimately rejected the bid as inadequate.

Even if Highfields or another private equity group were to get interested again, they’d be dealing with a poor business model compared to early 2005.  This company has gone from decent, to marginal, to bad, to a disaster.  A classic private equity firm wouldn’t be interested.  Now it would be a complete and total turnaround or bailout firm, and they’d be fighting a major battle from the lower ground.

We still review this from time to time to see if we can make the justification that someone would be interested in turning this around.  We haven’t changed our name to Dr. Pangloss yet.

Jon C. Ogg
September 20, 2007

Management is not impressing Wall Street and any chart-mongering technician would predict that there is not a visible end to the pain.  Enter private equity or a turnaround specialist, or even an activist investor that actually can make a difference.  Now that Circuit City has booted 3,400 higher-paid and more knowledgeable employees, the rift between it and Best Buy is even wider.  It is less noisy and less busy so you get in and out faster, but that is part of the problem.  Circuit City is just not as cool or as fun, and Circuit City is now more vulnerable to an electronics buyer going to Wal-Mart (WMT) or CostCo (COST) than its competitor.  It is no accident that Apple (AAPL) is choosing Best Buy over Circuit City. 

There has to be room for more than 1 or 2 independent retail electronics behemoths in major markets, assuming the #2 player doesn’t self-destruct.  We’ll address this one formally next week after the analysts and portfolio changes are out of the way and after the dust settles.  The economic cycle is much different now than two years ago, and Circuit City needs to fix its recent blunders.  Stay tuned.

Jon C. Ogg
April 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.