Circuit City to Slash Jobs, Close Retail Stores and Other Facilities

Circuit City Stores Inc., the target of a $3.25-billion takeover bid by Highfields Capital Management, said Wednesday that it planned to close 19 U.S. stores, a warehouse and five regional offices, cutting as many as 973 jobs.

The moves, to take place this month, will reduce fourth-quarter earnings by $30 million at the No. 2 U.S. electronics retailer. Circuit City also sold a building at its corporate headquarters in Richmond, Va, trimming long-term debt by $12.6 million, the company said.

Circuit City is closing four stores each in Michigan and Ohio, three in Illinois, two each in Indiana and Texas and one each in Kansas, Tennessee, Virginia and Wisconsin. Circuit City’s board of directors is reviewing the $17-a-share buyout offer announced Tuesday by Highfields, which said the company had been slow to improve performance. Circuit City has had losses in three straight quarters.

“They are being proactive in managing their portfolio of stores and trimming those that aren’t producing cash flow,” said Mitchell Kaiser, an analyst at Piper Jaffray Cos. in Minneapolis. “They would have made this decision long before the bid.”

The closings and job cuts come a year after Circuit City said it would shut 19 superstores and eliminate 901 jobs to get $35 million in after-tax savings. In February 2003, the company cut 2,000 jobs in switching from commissioned sales staff to hourly workers and closing 10 repair centers. It has about 42,000 employees.

Shares of Circuit City, which has more than 600 U.S. stores, fell 34 cents to $16.19 on the New York Stock Exchange.

Circuit City is leaving retail locations “with no reasonable expectation of positive cash flow and without relocation opportunities,” Chief Executive Alan McCollough said.