Bankrupt Circuit City Stores Inc., unable to work out a sale of the company, said Friday that it will go out of business — closing its 567 U.S. stores and cutting 30,000 jobs.
The nation's second-biggest consumer electronics retailer is the latest casualty of an unprecedented pullback in consumer spending that has driven other brands, such as KB Toys, Mervyns LLC and Linens 'N Things, into bankruptcy. Experts believe there will be more to come.
"This is the only possible path for our company," James A. Marcum, Circuit City's acting chief executive, said in a statement. "We are extremely disappointed by this outcome."
The company had been seeking a buyer or a deal to refinance its debt, but the hobbled credit market and consumer worries proved insurmountable. Negotiations for an acquisition went past midnight Thursday, Circuit City lawyer Gregg Galardi said in court.
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Two buyers — Mexican billionaire Ricardo Salinas Pliego, who controls a chain of electronics stores in Latin America, and the Golden Gate Capital private equity firm — had been looking to buy the company in a shrunken form, with either 350 stores or as few as 180 stores. But the company couldn't secure the necessary financing or support from vendors.
Some employees were notified Friday that they would lose their jobs and certain stores would begin closeout sales as early as today.
U.S. Bankruptcy Judge Kevin Huennekens gave final approval to the liquidation plan.
"This is a very sad day for management, the employees, customers and the community," the judge said.
Shareholders are likely to receive nothing, as is typical in bankruptcy cases. Circuit City said in court papers that it had appointed Great American Group LLC, Hudson Capital Partners LLC, SB Capital Group LLC and Tiger Capital Group LLC as liquidators. They will pay a 70.5 percent return on merchandise.
It was unclear what would happen to the company's 765 retail stores and dealer outlets in Canada. Galardi told a judge there are still bids for the Canadian business.
"Very, very sad," said Alan L. Wurtzel, the son of company founder Samuel S. Wurtzel and the chief executive from 1972 to 1986, board chairman from 1986 to 1994 and vice chairman until 2001. "I feel particularly badly for the people who are employed or until recently were employed."
The liquidation of Circuit City follows the worst holiday shopping season in four decades. People have slashed their spending since the financial meltdown in September as they worry about their job security and declining retirement funds.
KB Toys filed for bankruptcy in December and is liquidating stores. Industry experts expect more bad news in the coming months as spending likely will deteriorate further.
Circuit City filed for Chapter 11 in November as vendors started to restrict the flow of merchandise ahead of the busy holiday shopping season.
Circuit City said it had $3.4 billion in assets and $2.32 billion in liabilities as of Aug. 31.
Local stores
Two local Circuit City stores had remained open through an earlier round of closures. Now they, too, will liquidate. They're at 5530 E. Broadway and 4380 N. Oracle Road.