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Circuit City Bankruptcy Likely In ’09: Analyst

10/13/2008 03:01:00 PM Eastern

Cleveland, Ohio — A research analyst at KeyBanc Capital Markets, here, expects Circuit City to enter Chapter 11 bankruptcy protection as early as the first quarter of 2009.

“We believe a Circuit City bankruptcy has become a question of ‘when’ rather than ‘if,’” Bradley Thomas observed in a research note.

According to reports by StreetInsider.com and the Associated Press, Bradley said the challenging economic environment is accelerating the retailer’s trajectory toward Chapter 11, and will also diminish the likelihood that it can emerge from bankruptcy.

He noted that vendor support remains “the wild card” in the equation. “If one major vendor were to cut off Circuit City, we would expect others to quickly follow suit,” he wrote.

Best Buy would be a direct beneficiary of a Circuit City bankruptcy, Bradley added, which would outweigh the impact of falling TV prices and cutbacks in consumer spending.

He estimated that Best Buy’s earnings could rise by 37 cents per share in 2010 if Circuit City were to close 300 of its approximately 700 stores.

Circuit City was trading at 41 cents a share at press time on Monday afternoon.
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