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Circuit City Restructures Workforce

5/31/2007 12:36:00 PM Eastern

Richmond, Va. – Circuit City has dismissed 200 employees at company headquarters here today and has begun realigning store workers around the country as part of an ongoing corporate restructuring.

The headquarters layoffs affected departments across the board, and were implemented to control costs and eliminate duplication, spokesperson Jackie Foreman told TWICE. For the past several months Circuit City has been reorganizing its corporate workforce into cross-functional teams to promote teamwork and to allow the company to react more quickly to marketplace changes, she said. Headquarters staff now numbers about 2,900.

On the store front, the No. 2 CE chain is re-deploying managers and sales clerks as it prepares to implement new store operating procedures in June. The new policies were designed to improve store operations and the customer’s shopping experience, Foreman said. The procedures will differ by location, and include such changes as restocking shelves after, rather than during, store hours.

Personnel shifts include the transfer or dismissal of managers at lower volume stores, effectively reducing the headcount from five managers per store to between three and five per location depending on sales volume. The company is also eliminating the position of product specialist. To fill the breach, Circuit City is creating a new, better paying supervisory role for front line sales associates that, “puts more operating authority into their hands,” Foreman said.

All told, 654 store level staffers are being cut, although there will be "no significant change in the level of personnel in stores," she said.

Foreman added that the new procedures were tested in dozens of stores and resulted in improved associate morale and a better in-store experience.

Despite the layoffs, Circuit City expects to end the year with more hires than fires as it continues to add staff in such growth areas as its firedog IT and home installation service. The restructuring, Foreman said, will put the company on better footing to achieve long-term growth and success.

Goldman Sachs analyst Matthew Fassler observed in a research note that the HQ layoffs could save Circuit City an additional $15 million to $20 million annually, although the savings from in-store staffing shifts were already accounted for in the company’s previously announced $110 million cost cutting. “While we view this additional savings as a potential positive,” he wrote, “we are maintaining current estimates as it sounds like business trends are still under pressure.”

The moves represent the latest round in an ongoing corporate restructuring that included store closings, a management reorganization, and the dismissal in March of 3,400 of CircuitCity’s highest paid and most experienced sales clerks.

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