Circuit City Adds To Web, But Problems Loom

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Circuit City has enhanced its online presence by adding new tools to its e-commerce site and by launching a fantasy-football channel on YouTube.

But the announcements were overshadowed by a 4 percent drop in its share price last week on news that work was halted on a $45 million distribution center in Pennsylvania, and by an analyst report forecasting a rough road ahead for the struggling CE chain.

Adding to the gloom was an article in the Wall Street Journal suggesting that the retailer will ultimately be forced to sell all or part of the company.

The 1.3 million-square-foot distribution facility, located near Scranton, Pa., was scheduled to replace warehouses in Bethlehem, Pa., and Brandywine, Md., later this year, the Journal reported. Its completion has been put on indefinite hold.

The retail analyst, Matthew Fassler of Goldman Sachs, drew his bleak conclusion after meeting with senior Circuit City management. While the company is making headway on several tactical initiatives, including "a big increase" in the average home entertainment ticket and lower shrink, it will likely remain challenged by the weak economy and recent marketplace trends, he wrote in a company update to clients.

"We presume that sales and earnings are still falling sharply," he noted, and projected that absent a material turnaround — and assuming continued support from vendors — the company will have sufficient liquidity to continue operating for one to two more years.

Meanwhile, Circuit City took steps to bolster its online efforts, which remain one of the brightest areas in its portfolio. The company's e-commerce site will offer an expanded library of buying advice and new product reports through renewed and expanded agreements with, Popular Photography and Sound & Vision magazines.

The site is also expanding its CityCenter social-media platform, which enables shoppers to exchange information with each other and with sales associates through blogs, forums and monthly photo contests.

Elsewhere online, the company has launched a fantasy-football channel on YouTube. The YouTube FANalysts Channel will provide the latest analyses, tips and season predictions, the companies said, and will allow fans to discover, watch and share originally created videos.

"We are committed to providing our customers with the very best home entertainment experience this football season," said Brian Bradley, Circuit City's multichannel senior VP. "The Circuit City FANalyst YouTube channel provides a new way for us to engage our core customer base and challenge them to become part of our online community."

Separately, Circuit City created a minor stir earlier this month after it ordered all copies of Mad Magazine removed from the 40 stores that sell periodicals in reaction to an unflattering parody of the chain's circulars that appeared in the August issue.

As word of the action spread online and through the media, the company reversed its decision and apologized to the publication's editors.


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