Wattles Capital Management (WCM), one of the largest independent stockholders of Circuit City Stores, called for the replacement of Phil Schoonover, chairman/CEO of the chain, among a series of major changes.
The letter, signed by Ultimate Electronics owner Mark Wattles, who also controls WCM, blamed Schoonover and his management team for the company's declining performance over the past two years despite much-publicized attempts at turning the company's business around.
The letter stated that two years ago, "after what turned out to be a temporary industrywide oversupply of flat-panel TVs, Circuit City's senior management initiated a 'turnaround' to address what it perceived as a permanent reset to a lower level of gross margins in the industry. Since then, the competition's gross margins have essentially recovered, but Circuit City's have further deteriorated, resulting in a 'turnaround' that has unfortunately gone in the wrong direction."
The letter blamed senior management in "searching for a 'silver bullet' rather than focusing on basic retail execution, such as having the right products for sale, priced strategically, displayed well and sold by the right people. As a result, Circuit City's performance is now significantly worse than when the turnaround first began." It said Circuit City's "so-called 'turnaround'" has adversely impacted its operating performance, "destroying billions of dollars of stockholder value in the process."
Aside from Schoonover's departure, the letter called for the following changes:
"Focus on the 'customer experience' and strategies for making the current stores more productive."
"Begin addressing the actual issues facing the company and drive revenue growth, rather than focusing on cost-cutting strategies and 'spin' campaigns."
"Focus on the most immediate and least capital-intensive opportunities to improve the health of the business."
"Develop and articulate a deliverable promise for the new 'The City' brand that works within the realities of the current store footprints."
WCM reiterated its plea to its five candidates named to Circuit City's board at the company's annual shareholder meeting, scheduled for June 24.
Wattles Capital Management, headed by Mark Wattles, owns 11 million shares, or 6.5 percent, of Circuit City's common stock.