Circuit City's woes are such that bankruptcy for the CE retail giant, the second-largest in the U.S., is beginning to look inevitable. That's according to one analyst, who also said Best Buy will likely benefit from a bankruptcy of its rival.
According to the Associated Press Bradley B. Thomas, an analyst with KeyBanc Capital Markets, believes a Circuit City bankruptcy "has become a question of 'when' rather than 'if.'" For that reason, Thomas raised his rating for Best Buy to "Buy," from "Hold."
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The current economic crisis may be the flashpoint of CC's impending doom; however the toxic issues leading up to it have been building for years.
As an assistant manager with CC a few years ago, I saw the first signs when CC fired their top performing commissioned salespeople and replaced then with $9/hour flunkies.
Although Best Buy's sales staff is hourly, they at least have some chance for raises or advancement. In contrast, CC has made a habit of firing any hourly (experienced) salesperson they feel is overpaid and replacing them with a lower paid novice.
CC's manufacturer and extended warranty service is also marginal at best. Combine these issues with the fact most of CC's offerings are now "commidity" level items available for less on-line or at Wal-Mart and you have the perfect ingredients for failure.
Best Buy is in Financial trouble also. If you check their earnings they may be right behind Circuit City in filing for chapter 11 or Bankrupcy.
Well you would have an Analyst from a company that is heavely invested in Best Buy saying things like this.