Circuit City To Break Leases After Scuttling Auction
By Alan Wolf -- TWICE, 12/18/2008
Richmond, Va. — Circuit City plans to reject the leases for 154 stores slated for closure after failing to auction off the properties.
The retailer is shutting a total of 155 underperforming stores, with liquidators Hilco and Gordon Brothers conducting fire sales at 154 of the locations. The chain is holding its own liquidation sale at the remaining store.
Most of the locations will be closed before Christmas, Circuit City spokesman Bill Cimino told TWICE, with the balance to be shuttered by the end of the month.
A federal bankruptcy court authorized Circuit City to auction off 154 of the leases to help raise funds for the chain, but an insufficient number of bids were received. Cimino said the dearth of bids “was not a surprise” given the weak economic climate.
Circuit City now plans to reject the leases under provisions of its Chapter 11 reorganization after the stores close, saving the company about $6 million a month in rent.
The closures will leave the chain with about 570 locations.
The retailer has also received court approval to reject another 150 leases for previously closed stores and service centers, which have been costing the company about $40 million a year.
Circuit City is scheduled to file its third quarter earnings report on Jan. 9, and continues to receive the support of all its vendors, Cimino said.
Separately, Circuit City issued a press release designed to assuage consumer concerns over the company’s Chapter 11 status. “We want American consumers to know they can have confidence in our gift cards,” CFO Bruce Besanko said in a statement. “There’s a lot of misinformation and mistrust being spread on the Internet about retailers’ gift cards. We want to remind shoppers that legal proceedings surrounding Circuit City’s Chapter 11 reorganization have affirmed our authority to continue our gift card program.”
As in past years, the company has also extended its returns policy to Jan. 31 on any purchases made between November 2 and December 24.
For TWICE's complete coverage of Circuit City and Tweeter.
