Circuit City will close 155 stores

RICHMOND, Va. -- The company said it will shutter 155 of its more than 700 stores in 55 markets, including Phoenix and Atlanta, by Dec. 31, laying off about 17% of its domestic work force. According to its website, the company had nearly 46,000 employees domestic and international at the end of February.

Circuit City also said it will further reduce store openings and plans to work with landlords to renegotiate leases, lower rent or terminate agreements.

The company said it expects the stores it is closing, which generated about $1.4 billion in net sales in fiscal 2008, will not open Tuesday and store-closing sales will begin Wednesday.

The move comes as Circuit City heads into a crucial holiday shopping season that could determine its future, during a slowdown in consumer spending that has even the least vulnerable retailers worried.

"The weakened environment has resulted in a slowdown of consumer spending, further impacting our business as well as the business of our vendors," James Marcum, vice chairman and acting president and chief executive officer said. "The combination of these trends has strained severely our working capital and liquidity."

Marcum called the decision to close stores "difficult, but necessary."

Circuit City also provided updates on other aspects of its business, including restrictive actions taken by vendors, such as limiting credit for purchases. But the company said while it is working to secure support from vendors, the "current mix of terms and credit availability is becoming unmanageable for the company."

It also said it has been unable to collect an income tax refund of about $80 million that Circuit City believes it is owed from the federal government.

The company has had only one profitable quarter the past year, posting a wider second-quarter loss in September with a 13% decline in sales at stores open at least a year. Its results have weakened as the company faces significant declines in traffic, heightened competition from rival Best Buy and others and a weakened brand position.