While vultures continue to circle around the body of consumer electronics retailer Circuit City Stores, Inc. (NYSE: CC), the company is at least trying to look alive even though much of the world has left it for dead. Circuit City's latest travail is offering "back to school tips" to concerned parents, who, after reading Circuit City's tips-as-a-marketing-press-release, must think the retailer is on its last leg.
Apparently, many retailers believe the majority of the American public are seasonal procrastinators. The "rush to back to school" is not really a rush more than a shopping highlight for many retailers from apparel to computers to shoes to notebooks (the paper kind).
Circuit City's latest effort states some statistics as a lead-in for customers to come into their local Circuit City and shop for PCs and all the related garb that goes with them. As in, printers and ink and thumb drives ... oh my.
Circuit City's parting shot in its "back to school" montage was the mentioning of a gift card. In fact, you can email a gift card from your PC to your college student! Wow, how 2001-ish! I'm just confused on why Circuit City even participated in a "duh" survey like this to drum up a rather lackluster press release from a company that couldn't manage itself out of a shoebox.
TheStreet.com's Jim Cramer says that as consumers try to stretch their dining dollar, Darden, Yum! and McDonald's will benefit.
We all know we are overstored in this country and over-restauranted. There are tons of players -- so many that the competition got too hard. Now they collapse. That Uno might miss a payment, that Bennigan's and Steak & Ale are going away, that Bakers Square and Village Inn have filed for bankruptcy: All say the industry is in big trouble.
We read all of these horrible articles every day about restaurants, and yet we see that the stocks of Yum! and Darden hang in great, particularly the first, which gave hideous guidance and yet is now higher than it was before it told people commodity costs were hurting it. McDonald's? How many stocks just hit their 52-week high?
Shares of Circuit City (NYSE: CC), the outhouse of electronics retailing, continue to frustrate investors, falling more than 4% yesterday after the company said that it would delay the completion of a new $45 million distribution facility that had been intended to consolidate the operations of two existing warehouses. Today's paltry bounce of a penny hardly makes up for the bad news.
A piece in today's Wall Street Journallooks at (subscription required) the company's history of missteps that began in 2006 when the company failed to respond quickly to price declines in LCD TVs, and was compounded by cost-cutting moves that involved eliminating the company's most productive employees.
Now the company is running out of money and desperately needs to do a deal. Blockbuster (NYSE: BBI) had made a conditional offer of $6-8 per share back in May, but withdrew it and now the stock is trading under $2 -- and there don't appear to be any new suitors on the horizon.
You might think that corporate train wreck Circuit City (NYSE: CC) would have a lot of things to worry about -- like, oh, I don't know, the fact that it lost $165 million last quarter. Or the stock price, which has gone from $30 to $2 in less than three years. And with fellow wreck Blockbuster (NYSE: BBI) having withdrawn its proposal to acquire the company, Circuit City is even out of the running for the prestigious Stupidest Merger in History That Doesn't Involve the Company Which Owns This Website Award.
You might think that Circuit City management has plenty to keep it busy, but you'd be wrong. Circuit City banned its stores from selling an issue of MAD Magazine that made fun of the company, referring to it as "Sucker City." Hah.
But yesterday the company reversed course and allowed the magazines to be sold, with a PR spokesman blaming "some overly sensitive souls at our corporate headquarters" --
When Best Buy Inc. (NYSE: BBY), Circuit City Stores Inc. (NYSE: CC) and Wal-Mart Stores Inc. (NYSE: WMT) are all stacked up together, which one comes out on top? Well, it depends on how you phrase the question: Are we talking solely prices here, or customer service? The pricing angle can be debated all day long. When it comes to service though, my experience is very similar to the conclusion that this article states: Best Buy is king.
Target Corp. (NYSE: TGT), although a much cleaner and brighter location in which to shop, seems to have a weak schedule in the consumer electronics department. Most weeks, I roam into many retail chain locations just to walk around and observe. In many cases, Target seems well-stocked when it comes to checkout personnel, but not if you have questions about a flat-panel television. At Circuit City, its tarnished reputation is well-deserved: It's hard to just find anyone to help you.
And Wal-Mart? The world's largest retailer has made strides to really improve the consumer electronics sections in its stores. The customer service, however, is a completely separate story. If I step into a Best Buy, there's a 99% chance that I will be greeted by a security guard manning the front door, and will be asked at least four times within five minutes if I need help.
While Wal-Mart may have slightly better prices on many consumer electronics items, is that all that matters? Of course not. I give Wal-Mart props for making large strides in product presentation, though. Chris Denove of J.D. Power and Associates says that "Across many industries, we've seen that the retailers that grow customer-service ratings the fastest have greater sales growth." If Wal-Mart wants to try and really compete with Best Buy's winning combination of price and service, it best listen to that advice. Target -- it's also time to step it up on your end. What are you waiting for?
Microsoft (NASDAQ: MSFT) wants to expand the reach of its vital Office suite of products. The software giant wants to utilize a subscription model for the collection of programs. The initiative will commence later this month at Circuit City (NYSE: CC) and it will eventually reach other retail stores. People will also eventually have the option of accessing the subscription product via computers such as ones made by Dell (NASDAQ: DELL). The cost is reported to be $70 for twelve months of Office access.
This is an interesting scheme. As the article points out, businesses might not bat an eye at subscribing to software applications, but for consumers, this is a different ballgame. Many of us, myself included, are so used to going down to a Best Buy (NYSE: BBY) to purchase a software package for a flat fee that paying yearly dues just seems like an alien concept. And I'd say this goes double for something as large and complex as the Office program. Microsoft believes that $70 on an annual basis will be perceived as cheap and will expose consumers who might normally either seek upgrades on a pirated basis or who would simply continue using older versions to regular approved updates. It is a large investment, after all, to upgrade to a new iteration of Office.
Microsoft would be wise to market the heck out of the subscription model for Office, taking full advantage of the inflationary environment we are currently in. If potential users can be convinced of the value proposition, then they could eventually become hooked on the promise of upgrades over time for the relatively economical price indicated. Checking around on the net, I notice that a lot of the negative comments about this idea center on the fact that there are already free alternatives out there to Office, such as applications offered by Google (NASDAQ: GOOG).
No you can't. Circuit City doesn't have any sort of game plan at the moment, and it's sinking fast. The company's stock is priced at $2.31 as I write this. The goofy Blockbuster Inc. (NYSE: BBI) transaction is gone (for now, at least...there are reports saying that it could be resurrected at a later date, although I don't buy that it will happen at all). It isn't competing effectively against Best Buy Co., Inc. (NYSE: BBY) and Wal-Mart Stores, Inc. (NYSE: WMT). In short, Circuit City is a Titanic-like electronics retailer that doesn't know how to keep its ship from hitting icebergs.
So this resignation isn't surprising. Of course, is there any way to make money off the stock? I do believe there is downside to come on the share price, which would therefore imply that shorting it could work out. Alas, I wouldn't recommend it. You just know that some company and/or financial entity out there might come in at any point and make a bid, and the shares could skyrocket. Although the Blockbuster deal didn't make sense, it doesn't mean that there isn't some transaction scheme out there that would be logical. Circuit City is a stock merely to watch out of curiosity, it's not one to do anything about.
Disclosure: I don't own any company mentioned here; positions can change at any time.
Citing unnamed sources, The New York Postreports that Blockbuster (NYSE: BBI) could come back to Circuit City (NYSE: CC) to try to acquire the company.
The sources said that Circuit City pulled out because of weakness in the credit markets, but still feel that a deal could have strong long-term benefits. I don't think it makes sense for Blockbuster to acquire the company but, if it does, pulling out for now is probably a good idea. Shares of Circuit City tanked when Blockbuster announced that it was no longer pursuing a deal, and, according to the Post,Best Buy (NYSE: BBY) isn't interested because of antitrust concerns. With few indications that there is anyone else bidding for Circuit City, and the company's fundamentals in a rapid state of decline, it seems like the longer Blockbuster waits the less it will have to pay. Unless another bidder emerges, there's no real rush.
Back in April, Blockbuster made a preliminary proposal to acquire Circuit City "with an all cash offer in the range of $6.00 to $8.00 per share, subject to due diligence." With shares of Circuit City down 9% to $2.32 on Wednesday, Blockbuster could probably get the company for considerably less if it made another offer today.
With Circuit City bleeding cash, continued consumer weakness could make it really cheap on the courthouse steps later this year. Maybe then Blockbuster shareholders would be more supportive of a deal.
One of the silliest possible mergers in recent memory (no small accomplishment) is dead in the water now that Blockbuster (NYSE: BBI) has announced that it will no longer pursue its previously announced effort to acquire Circuit City (NYSE: CC).
In a press release issued yesterday afternoon, Jim Keyes, Blockbuster Chairman and CEO, said that "Based on market conditions and the completion of our initial due diligence process, we have determined that it is not in the best interest of Blockbuster's shareholders to proceed with an acquisition of Circuit City."
Given the shares of Blockbuster tanked when the company announced its initial offer, the company's shares could be expected to trade up today.
For Circuit City, the situation is more grim. With its stock in the toilet, Blockbuster's offer represented one of the few exit strategies. Blockbuster's assertion that its "initial due diligence" was a factor in its decision to withdraw its offer indicates that the company's financial situation may be worse than it appears to outside shareholders.
In a press release offered in response, Philip J. Schoonover , chairman, president and chief executive officer of Circuit City, said that "Our exploration of strategic alternatives is intended to serve the interests of our shareholders by considering every possible alternative to enhance shareholder value. The board's review was not dependent on Blockbuster's participation."
But Blockbuster was the only suitor to emerge publicly so far and, now that it's lost interest, there's little reason to expect anyone else to emerge.
Brand-Name Stocks Uner $10: Buyer Beware These well-known names in the bargain bin may look appealing, but experts advise laying off until their earnings picture is clear. Among the stocks to be weary of are Sprint Nextel, Motorola, Ford Motor, Qwest, Washington Mutual, Northwest Airlines, Del Monte, Rite Aid, Chico's, Crocs, United Airlines, Palm, Sealy, Blockbuster, Circuit City and Orbitz. Brand-Name Stocks Under $10: Buyer Beware
Ever since Circuit City Stores (NYSE: CC) CEO Philip J. Schoonover sliced 3,400 sales people in March 2007 to save money, I have questioned the savvy of its management. That's because many of those fired sales people took their customers over to Best Buy (NYSE: BBY). As its stock lost 86% of its value, I was surprised that anyone would make a bid for it.
Yet Blockbuster (NYSE: BBI), the struggling video store chain, decided to buy. I don't know what got into Blockbuster's head to make it think that combining two struggling companies would make an agile competitor. The Richmond Times reports that it wanted to create a one-stop shop for movies, games, and electronic equipment. But that dream died when Blockbuster pulled its $1.3 billion offer after reviewing Circuit City's books.
Carl Icahn has said he would buy Circuit City. But it's losing money -- $164.8 million, or $1 a share, in its fiscal first quarter. This was $100 million more than its Q1 2007 loss. And Blockbuster's conclusion after a closer look at its financial statements does not bode well for Circuit City's future. Circuit City stock is down 7.8% in pre-market. Let's see whether any new bidders emerge.
U.S. stock futures were higher Wednesday morning, as Wall Street could try to having yet another positive session. While Starbucks news of store closing and reports Microsoft may still be interested in Yahoo helped lift sentiment, UnitedHealth already issued a warning this morning. Employment data is also on tap before the market opens.
U.S. stocks finally ended higher on Tuesday. Surprisingly, it was car sales that helped the mood on the Street as as June sales came in not as bad as expected. The Dow industrials ended 32 points higher, or 0.28%, the S&P 500 added 4 points, or 0.38%, and the Nasdaq Composite added 11 points, or 0.52%.
Today, investors will have the ADP June private sector employment figures to chew on ahead of the government's report tomorrow. The employment report is expected to be released at 8:15 a.m. EDT. Then, at 10 a.m., May factory orders are due out.
Also on the docket today is weekly crude inventories, usually released at 10:30 a.m. EDT. While oil came off highs Tuesday due to a slightly stronger dollar, it again rose above $141 a barrel Wednesday, due to persistent supply concerns that has analysts warning of higher prices yet. An IEA report saying supplies will remain tight and demand will likely grow despite higher prices helped push prices higher.
This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.
Who would have thought that privately held, 2002 upstart Vizio could upset the LCD TV market and knock giant Sony (NYSE: SNE) off of its perch?
The world of televisions is transforming itself to flat-panel, high-definition and big screens. Vizio was founded in 2002 and is taking major market share from Sony and former second fiddle Samsung. Vizio's promise to its customers is simple -- small is big. The company has only 85 employees, mostly in sales and marketing, and outsources the manufacturing to other suppliers. The key to the Vizio story is getting the product through as many retail doors as possible.
The company has signed up a couple of big wigs in the retail sales channel: Wal-Mart (NYSE: WMT) and Costco (NASDAQ: COST), to go along with Sears (NASDAQ: SHLD) and Circuit City (NYSE: CC). Vizio is also available from Dell Computers e-commerce web site (NASDAQ: DELL). Vizio understands it's all about distribution, distribution, distribution.
Vizio has taken the marketing position that television decisions typically are the domain of the male of a household and, as such, has partnered up with the NFL. Football and big screen TVs are synonymous. Vizio has signed All-Pro running back LaDainian Tomlinson of the San Diego Chargers to be its spokesperson. Tomlinson is regarded as both a fine gentleman and perhaps the greatest running back since Barry Sanders. His wholesome image is magical to Vizio's marketing program.
Circuit City Stores, Inc. (NYSE: CC) is sitting on the brink of a buyout. The question is who, and how much. The deal with Blockbuster Inc. (NYSE: BBI) is still very possible, but investor Mark Wattles of Wattles Capital Management has said to expect a deal within four weeks regardless. With Circuit City shares nearly the bottom -- closing yesterday at $4.35 -- some entity needs to swoop in and just offer cash for the company. As in, now.
It's a foregone conclusion that Circuit City can't compete with other national consumer electronics retailers. The access to its prime real estate locations would be a main reason for the chain to be bought up at such a fire sale price. Wattles said Blockbuster and two unnamed private equity firms are most likely the three finalists ready to step up and purchase Circuit City.
While all this "due diligence" is going on for buying a retailer at such a low price, shareholders are getting antsy with good reason. It's hard to imagine any shareholder making out on Circuit City stock -- including Wattles who stands to lose a good chunk of change unless the shares rebound. Circuit City's largest investor, HBK Investments (a 9% stake), probably needs to have a deal done as soon as possible with a sweet premium to the current share price. Who could blame them?
Regardless of who buys Circuit City, this is a company that needs to return shareholder equity back to its shareholders and just fold up and go away. It's not going to get any better.
While vultures continue to circle around the body of consumer electronics retailer Circuit City Stores, Inc. (NYSE: CC), the company is at least trying to look alive even though much of the world has left it for dead. Circuit City's latest travail is offering "back to school tips" to concerned parents, who, after reading Circuit City's tips-as-a-marketing-press-release, must think the retailer is on its last leg.
Shares of 
You might think that corporate train wreck 
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Citing unnamed sources, The New York Post 
One of the silliest possible mergers in recent memory (no small accomplishment) is dead in the water now that 
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U.S. stock futures were higher Wednesday morning, as Wall Street could try to having yet another positive session. While Starbucks news of store closing and reports Microsoft may still be interested in Yahoo helped lift sentiment, UnitedHealth already issued a warning this morning. Employment data is also on tap before the market opens.
This post is part of 
Closing Bell: Dow ends higher; HPQ, NOVL, PAY climb, EBAY, NVTL decline
Most likely, you'll determine the fuel for the car of the future
Chasing Value: Considering Berkshire Hathaway... again
