Circuit City Files Chapter 11 Bankruptcy

This is no suprise to us, right? I've posted about Circuit City and their woes going back to April 15th, when Blockbuster said they would buy them. At the time of the anouncement I believed it was one of the dumbest acquisition announcements I have EVER seen in my life (or read about from older times). Blockbuster, a struggling retailer in their own right and one without a spectacular balance sheet thought they would buy Circuit City on April 15th (tax day as well).
http://betterbizbooks.blogspot.com/2008/04/blockbuster-to-buy-circuit-city-doh.html

By July, Blockbuster woke up (management probably was tired of being told they were the biggest idiots in the room) and backed out of the deal. I know this is bold language but it seemed like a complete "NO BRAINER" type of deal NOT TO DO.

http://betterbizbooks.blogspot.com/2008/07/blockbuster-to-not-buy-circuit-city.html

So lets take a look at some interesting facts about Circuit City and their industry.
1) Their stores are DEAD when it comes to foot traffic vs. Best Buy.

2) I find it interesting that Ultimate Electronics, Tweeter and Circuit City have all died a painful death in the last few years.

3) Linens N Things went into Chapter 11 earlier this year. Recently they went Chapter 7 and began liquidating assets (ie. completely shutting down.) Circuit City announced a 20% store closure last week, big cuts in management LATE last week, Chapter 11 this week and likely, in my opinion, Chapter 7 eventually.

Seriously, these guys have been HEMORHAGING cash for some time, they have NO differentiation vs. Best Buy (me too concept) and people have STOPPED shopping there altogether (at least people I know.) Who will buy a $2000 TV from a bankrupt retailer? We'll see how it plays out in the stores but I am NOT optimistic re: their future.

Dan Ross
http://www.betterbizbooks.com/

Linens N Things to Declare BK?

Anything related to housing (ie. disposable income spending in the home) is being impacted negatively MORE than other types of spending, including clothing (my 2 cents).

Rumors are now floating around that Apollo group, that bought Linens N Things for $1.6 billion back in 2005, will possibly declare bankruptcy in the near future......

http://www.reuters.com/article/ousiv/idUSN1136290720080411

Dan Ross
http://www.BetterBizBooks.com

4th Airline in as many weeks to Declare BK? Another sign of economic weakness

Gas prices going through the roof and consumers only willing to spend so much = airlines declaring Bankruptcy left and right. This economy is only getting worse.......more pain is coming (sad to say & I hate to say it).

Aloha, ATA, Skybus & now Frontier. Frontier will still operate in BK while others will face liquidation but it says something about the fragility of their finances when a credit card policy shift by their bank drives a company into bankruptcy....

http://www.usatoday.com/money/industries/travel/2008-04-11-frontier-files-for-bankruptcy_N.htm?csp=34?se=yahoorefer

Dan Ross
http://www.BetterBizBooks.com

Another disturbing consumer datapoint.

• Filings for Bankruptcy Up 18% in February http://www.nytimes.com/2008/03/05/business/05bankruptcy.html

Americans filed for bankruptcy in growing numbers in February, buckling under the combined weight of rising energy prices, a weakening housing market and sky-high personal debts.
An average of 3,960 bankruptcy petitions were filed per day nationwide last month, up 18 percent from January and up 28 percent from a year earlier, according to Automated Access to Court Electronic Records, a bankruptcy data and management company.

Dan Ross
http://www.BetterBizBooks.com