Circuit City Shedding Real Estate
By Alan Wolf -- TWICE, 2/16/2005
Richmond, Va. — Circuit City will close 19 stores, five regional offices and one of 10 distribution centers by month’s end, and has sold a corporate office building, in an effort to bolster its financial performance.
The announcement comes one day after the company disclosed that a Boston hedge fund had made an unsolicited $3.25 billion offer to buy it out and take it private in the belief that it can revitalize the struggling business.
Most of the stores slated for closing, which are located in Illinois, Indiana, Kansas, Michigan, Ohio, Tennessee, Texas and Wisconsin, are within close proximity to other Circuit City stores that were added or relocated to more attractive sites within the same markets.
“Based on our continuing analysis of markets across the country, we have identified 19 superstores located in trade areas that we believe can no longer support a Circuit City superstore, leaving the locations with no reasonable expectation of positive cash flow and without relocation opportunities over the near term,” said chairman/CEO Alan McCollough. “The repositioning of our stores within these markets continues, and it no longer makes financial sense to keep some of the stores in those markets open.”
The 19 stores, which accounted for $170 million in sales last year, will remain closed today and tomorrow, but will reopen on Friday for closeout sales of display merchandise. Lease arrangements are being handled by DJM Asset Management, LLC.
The distribution center, a 400,000-square-foot facility in Doswell, Va., will close at the end of the month.
The store and office closings will cost the company about $30 million after taxes in lease terminations, fixed asset disposal, severance and other costs, which it will incur in its fiscal fourth quarter. Expenses associated with the distribution center closing are not expected to be material. Circuit City also pocketed $1.8 million and eliminated $12.6 million in long-term debt through the sale of a building on its corporate headquarters campus, here.
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