Circuit City Hits the Wall, Eight More Retailers Announce Store Closings

By Christina Zarrello
Citing pressure from the recession and increased competition from Best Buy and Wal-Mart, Circuit City announced yesterday it has filed for Chapter 11 protection. Last week Circuit City announced it would shutter more than 150 stores in an effort to avoid filing bankruptcy during the busy holiday shopping season. But it was too little too late. In addition to Circuit City's bankruptcy announcement, other retailers that announced bankruptcies and store closings include Saks, Value City and La-Z-Boy.

In yesterday's announcement Circuit City noted it has $3.4 billion in assets and $2.32 billion in liabilities. Also, it owes HP $119 million and Samsung $116 million.

In October, the retailer hired a bankruptcy council, Skadden, Arps, Slate, Meagher & Flom LLP, which also is the same firm that advised Kmart in its Chapter 11 reorganization. In addition, Circuit City appointed FTI Consulting to create a turnaround plan and Rothschild Inc. to handle negotiations with banks in an effort to line up financing.

Under Chapter 11 reorganization, Circuit City will get a chance to avoid more store closures, reorganize debt and survive. Here are eight other retailers announcing bankruptcies or store closings:

La-Z-Boy: Plans to close 15 to 20 La-Z-Boy Furniture Galleries stores as a result of slumping sales. Declining consumer confidence, tightening credit and other economic factors have forced the company to move aggressively bring costs in line with slumping orders according to the company's president and CEO, Kurt Darrow. The company also is continuing to consolidate its warehouses supporting its La-Z-Boy Furniture Galleries dealer base.

Saks: Unveils it will close 98 Club Libby Lu specialty stores and expects to close the shops by the end of its first quarter in 2009. Saks CEO Steve Sadove described the concept as "innovative," where girls ages 6 to 12 play dressup, have birthday parties, and sprinkle magic fairy dust. But he said it no longer fits with Sak's focus on its core Saks Fifth Avenue business.

Shoe Pavilion: The Sherman Oaks, CA-based footwear retailer, Shoe Pavilion, filed for chapter 11 bankruptcy protection on July 16, 2008, but now says it plans to close all 64 of its remaining locations. As of March 29, 2008, the off-price shoes and accessories retailer operated a chain of 113 stores. Since filing bankruptcy, Shoe Pavilion has closed 49 underperforming stores, leaving it with 64 left in the chain.

Value City Stores: The department stores chain filed for Chapter 11 bankruptcy in late October. The current state of the economy was the main reason for the filings according to Value City's CEO and CFO Stephen Darr. Seventy-five Value City stores across the country have closed since December 2007. The chain, which used to be part of Schottenstein Stores, is no longer affiliated.

84 Lumber: On October 20th, the retailer announced plans to close an additional 20 stores, bringing the total number of store closures to 80. The building products supplier continues to cite the slumping housing market. Most of the closings are "market consolidations" says company spokesperson Jeff Nobers, in which 84 would continue to operate some times out of newer, larger stores.

Big Dogs: With 231 stores-strong at its peak, Big Dog was down to approximately 140 stores by the end of 2007. Today, it has 71 stores left to close. The retailer expects 63 to 68 more stores to close through January 2009, leaving it with six to eight stores, which will liquidate remaining inventories in 2009.

Barbeques Galore: With 65 stores, the retailer filed Chapter 11 bankruptcy in early August. The company cited the slow housing market, as well as inability to obtain financing, as primary reasons behind its bankruptcy. On September 15th, the company announced the sale of "substantially all" of its assets to Grand Hall Enterprise Co. which intends to maintain Barbeques Galore as the chain's banner.

Sound Advice: Parent company Tweeter Home Entertainment Group announced 94 store closings after filing for Chapter 11 bankruptcy for the second time in less than a year. Tweeter filed for bankruptcy in June with a debt of $165 million, but New York-based investment firm Schultze Asset Management LLC bought the company out of bankruptcy for $38 million.

For more complete coverage on store closings that have taken place throughout 2008, see:

Circuit City Struggles, Mervyns and Linens Folds, More Stores Close

Toxic Economy Shutters More Stores

The Big Squeeze: 10 More Chain Stores Closing Their Doors

Steve and Barry's Stumble, More Retailers Close Doors

Retailers on the Ropes, 12 More Chains Announce Closings

Three More Retailers Drop in the Toughest Economy in Years

Retail Bankruptcies and Store Closings Signs of Grim Economy 

Sign of the Times: 6,000 Retail Stores Closing in 2008