Business

Circuit City plans closings, layoffs

Circuit City is closing one of its two stores in Lexington as part of the company's plan to close about 20 percent of its stores and cut thousands of jobs as it tries to survive.

The store at 2434 Nicholasville Road is one of 155 across the nation that will close, the electronics chain announced Monday. The company's store in the Hamburg shopping area will remain open.

The Nicholasville Road store will not be open Tuesday. It will reopen Wednesday to begin a going-out-of-business sale.

Circuit City stores in Lou isville and Paducah also are closing.

The company said the stores that are closing are its poorest performers.

Circuit City will slow the pace of opening new stores, and it will renegotiate leases for some stores that remain open. Circuit City will still have 566 stores.

Analysts say the moves announced Monday renewed the specter of bankruptcy hanging over the nation's No. 2 consumer electronics retailer, heading into a holiday shopping season that could determine its future.

"Clearly, (Circuit City) is frantically working to keep itself alive," J.P. Morgan analyst Christopher Horvers wrote in a note to investors.

James A. Marcum, vice chairman and acting president and chief executive, called the decision to close stores "difficult, but necessary."

"The weakened environment has resulted in a slowdown of consumer spending, further impacting our business as well as the business of our vendors," Marcum said in a statement. "The combination of these trends has strained severely our working capital and liquidity."

The stores being closed are spread throughout 28 states, including multiple locations in areas such as Phoenix and Atlanta. The company is laying off about 17 percent of its domestic work force.

Based on nearly 43,000 employees as of Feb. 29, the layoffs could affect up to about 7,300 workers. The company said the number would probably be lower, in part because employees in some markets might go to work at other stores. It would not give further details.

Circuit City's decision to close stores was "rational and necessary to attempt to conserve capital," Standard & Poor's Equity Research analyst Michael Souers told investors.

"We think there is a fair chance (Circuit City) will be forced to file for Chapter 11" bankruptcy protection, Souers wrote.

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