Circuit City liquidates; layoffs mount at Hertz, AMD, Pfizer
— -- Circuit City's cctyq plans to close its 567 stores will not likely mean higher prices or fewer electronics choices for shoppers at other stores, but the retailer's gift card holders will need to use them quickly.
All gift cards will be redeemed at full value as long as stores are open and inventory remains. But that will be by the end of March at the latest. Circuitcity.com shut down over the weekend, limiting options further. Read the press release
As the second-largest electronics retailer after Best Buy bby, Circuit City was once well-positioned. But most experts point to the chain's 2007 layoff of thousands of its highest-paid — and most experienced — sales clerks as the start of its rapid descent. Many went to Best Buy, which consistently ranked higher in customer service scores in recent years.
"Circuit City miscalculated when they decided that price was the ultimate factor in customers' choice of electronics retailers," says Robert Richardson, president of Associates Interactive, which specializes in retail training programs. "As a result, they suffered immensely … and ultimately became vulnerable to multiple category retailers and wholesale clubs with better prices, as well as competitors that offered better-trained associates."
Contributing to Circuit City's steep sales declines were decisions by Wal-Mart wmt and Target tgt over the past few years to emphasize electronics sales. In addition, various retailers from RadioShack rsh to CVS cvs to newegg.com became at least partial competitors.
The growth of online electronics retail, along with websites devoted to helping consumers find deals, made it even more difficult for Circuit City to compete. Finding a good price and brand of digital camera or HDTV has never been easier.
Shopping expert Christine Frietchen says Circuit City's prices were "never the absolute lowest," but its demise leaves voids. She says its huge displays of TVs far surpass the discounters and most competitors. And the loss of its online user reviews, which were unedited and included products that many sites and publications ignored, "is really a shame."
"Despite growing comfort levels with online shopping for electronics, most people still want to physically see big-ticket items in person before buying them," says Frietchen, editor in chief of ConsumerSearch.com, which analyzes professional reviews and user ratings to identify top-rated products. Some excess Circuit City inventory is expected to wind up on online auction sites. Overstock.com ostk, for example, typically works with the liquidation services of struggling retailers to sell inventory.
"When the dot-com bust hit (in the early 2000s), this company rose from stranded inventory (of failed companies)," says Mark Griffin, Overstock's general counsel.
He foresees a number of deals with services like Overstock in the coming weeks, though it doesn't have a pact with Circuit City.
Elsewhere Friday:
• Rental car company Hertz Global Holdingshtz said it will eliminate more than 4,000 jobs worldwide as it further cuts costs amid slowing demand. Read the press release.
The company expects to save $150 million to $170 million this year and take a related fourth-quarter charge of $20 million to $25 million.
Hertz already has trimmed its work force by 22% in the last two years. The new reductions will bring staffing to 32% below August 2006 levels. According to CapitalIQ, the company currently has about 29,350 workers in total, who operate about 8,100 locations in 144 countries.
The company said the latest round of eliminations, which will take place in its fiscal 2008 fourth quarter and first quarter of 2009, will come in its car and equipment rental operations as well as corporate and support areas. The reductions will occur across all regions.
Chairman and Chief Executive Mark P. Frissora said in a statement that Hertz is still committed to its global airport and off-airport car rental and equipment rental businesses and will add the "necessary resources" when operating conditions get better.
•Advanced Micro Devicesamd said it plans to cut 1,100 jobs, 9% of its global staff, and slash the remaining employees' pay as the chipmaker hopes its third round of layoffs in a year can help it get through a brutal market for computer sales.
The company, based in Sunnyvale, Calif., said Friday that 900 workers will have their jobs cut. The rest of the reductions are coming from attrition and the previously announced sale of a business unit.
The company has 15,000 workers currently, but it is spinning off its manufacturing operations, which have 3,000 employees who are not affected by Friday's announcement. So AMD's cut of 1,100 jobs amounts to 9% of the remaining 12,000 workers.
• Health insurer WellPointwlp said Friday that it will cut about 1,500 jobs. The company, based in Indianapolis, will eliminate about 3.5% of its staff, which currently totals more than 42,000. The cuts include 900 unfilled positions and 600 employees. Read the press release.
WellPoint has employees in 46 states, and the cuts will be felt in 25, a spokesman said.
• Published reports said drug giant Pfizerpfeplans to lay off nearly a third of its 8,000 salespeople.
Bloomberg News and the Wall Street Journal say Pfizer will cut as many as 2,400 sales representatives.
Pfizer, the world's No. 1 drugmaker by revenue, declined to comment on the reports, which come the same week as it confirmed it is cutting the jobs of up to 800 scientists and other research staff.
The latest sales division cuts would follow elimination of roughly 2,000 sales jobs under a restructuring that began two years ago and resulted in about 14,600 jobs being slashed.
Pfizer has been working to lower costs ahead of generic competition expected in late 2011 for its blockbuster cholesterol drug Lipitor, which brings in nearly $13 billion a year. Competition is likely to cut sales drastically.
The company is widely expected to make an official announcement about layoffs when it reports on its 2008 fourth-quarter and full-year financial results, on Jan. 28.