Circuit City Filing For Bankruptcy

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The electronics retailer is filing for bankruptcy just one week after it announced a plan to close a fifth of its U.S. stores. Nonetheless, the company plans to stay open for business as the busy holiday season approaches.

MADELEINE BRAND, host:

This is Day to Day. I'm Madeleine Brand.

ALEX COHEN, host:

And I'm Alex Cohen. Electronics retailer Circuit City filed for bankruptcy this morning. The Chapter 11 filing comes just a week after the company said it could close more than a 150 stores. Circuit City plans to stay in business while restructuring. The company says it had to file for bankruptcy in order to stock its shelves for the holidays. NPR's Tamara Keith reports.

TAMARA KEITH: Circuit City is in the midst of a major restructuring, trying to right a once mighty retail chain that in recent years has lost market share to Best Buy, Wal-Mart and online retailers. But as the ever-important holiday shopping season approached, the company's suppliers grew increasingly concerned about Circuit City's ability to pay for its purchases. According to the company, those concerns escalated considerably in the last week. Chapter 11 bankruptcy protection allows Circuit City to assure its vendors that they will get paid, says Stacey Widlitz, a retail analyst with Pali Research.

Ms. STACEY WIDLITZ (Managing Director, Pali Research): This gives them the ability to sort of limp along through the holidays but have merchandise in their stores. The alternative is, they would be way under-supplied.

KEITH: Widlitz says Circuit City's problems have been exacerbated by the credit crunch and the down economy. But she points out that, for years, the company's sales have not been going in the right direction. The chain has been around for a long time, and she says many of its stores are located in shopping centers that are now less than desirable.

In a written statement, Circuit City said it hopes to, quote, emerge as a stronger business, with an improved national distribution channel for our vendors and a more compelling offering for our customers. Widlitz says she expects more retailers to find themselves in trouble in the coming months, as the reality of the housing downturn hits consumer spending hard.

Ms. WIDLITZ: And now, they realize, you know, we're over-stored. We need to cut back. We need to shut down. We need to, you know, cut off growth. So, I think you'll see that in a lot of businesses.

KEITH: Retailers are predicting one of the most challenging holiday seasons in years. Tamara Keith, NPR News, Washington.

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