Circuit City Stores Inc., the nation's No. 2 consumer electronics retailer, said Thursday it plans to close seven domestic Superstores, a Kentucky distribution center and 62 company-owned stores in Canada to cut costs and improve its financial performance.
The closings will take place over the next six months at an expected total cost of $85 million to $105 million, all to be incurred in the current fourth fiscal quarter, which ends Feb. 28, Circuit City said.
"Because of the intensified gross margin pressures that we saw in the third quarter within the flat panel television category, we launched efforts to accelerate the timing of planned initiatives to improve sales and gross margin, as well as improve the efficiency of our expense structure," chief executive Philip J. Schoonover said in a statement.
If memory serves (and please correct me if I am wrong), Wal-Mart started the Christmas season with a big discount on a specific flat panel TV. The other electronics retailers followed this with similar cuts in their inventory. The Big Picture mentioned this in their analysis of the Christmas season, pointing out the actual cost of the Christmas season in terms of decreased business margins.
This is the end result. While the Christmas season was fair but not great, the overall cost appears to be extreme margin pressure at one of the largest consumer electronics stores in the country.