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New York: Economic downturn leading tightening of consumer spending has forced bankrupt second largest electronic retailer in the United States, Circuit City, to go out of business.
The company which had filed for bankruptcy protection in November in the hope of emerging as slimmer outfit apparently came to the conclusion that it is not possible and decided to close its stores across the United States and liquidate its assets.
The company announced the closure of all 576 of its stores after its efforts failed to even to find a buyer.
Reports said that most of its 34,000 employees would be laid off. It would put its merchandise on sale today and close its doors permanently by the end of March.
Analysts said this shows that uphill task that incoming President Barack Obama will face in his efforts to create hundreds of thousands job and some even questioned whether the stimulus package proposed by him could the do the trick.
"We are extremely disappointed by this outcome," said James A. Marcum, acting president and chief executive of Circuit City Stores. He called the liquidation "the only possible path" for the 60-year-old company.
"Regrettably for the employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders to structure a going-concern transaction ... and so this is the only possible path for our company," he added.
The demise of Circuit City, while not surprising given its declining sales, is part of a radical shift taking place in retailing, the New York Times said, adding that weak chains unable to weather the freeze-up in consumer spending and choked by tight credit markets are closing.
The downturn comes after years of growth, when retailers responding to a flood of demand from consumers spending borrowed money opened thousands of stores. Now that the housing downturn and economic crisis have turned off the credit spigot and sent frightened consumers into hiding, it is becoming evident that many of those stores are not needed, the paper added.
Many more retailers are expected to follow suit as they run out of working capital or are unable to refinance their debt, the paper said.
Analysts said the sales during the holiday season were weak and the profits were still weaker as most the merchandise was sold on deep discount. They expect only discount stores to survive the downturn and say that those who survive could be assured of good business.
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