Circuit City filed Chapter 11

[Mr Peabody]

After CC making headlines last week for announcing closure of 155 stores, I heard this morning on the news that they have now officially filed chapter 11 bankruptcy. One would think on the bright side we are heading into the holiday shopping period but on the down side, the economy, and it hasn't been good for a long while.

I was in BB a few weeks back and it was dead, the least customer traffic than I've ever seen. I was in Toys-R-Us Saturday and you would have thought it was December. I couldn't get through some of the isles and the staff on the floor were very busy helping people. It would have been interesting to see if BB had picked up. Is this a sign things are picking up, is it that people are shopping early to be sure something is under the tree, maybe people have some confidence since the election went the way it did? The big question will this surge carry over to the electronics industry.

Stay tuned for scenes from our next episode.

[mbbuchanan]

That sure is a lot of lost jobs, what a shame.I think this holiday season will be very telling as to where the economy is heading.I read today that two-thirds of the market is driven by consumer spending. Not being an expert I would guess that if retailers have a better than expected Christmas, then maybe it will be a sign of a turn-around not being to far-off.I just don't see how with so many people with no equity and credit so tight, that there will be a big splurge this year.

[Woochifer]

That sure is a lot of lost jobs, what a shame.I think this holiday season will be very telling as to where the economy is heading.I read today that two-thirds of the market is driven by consumer spending. Not being an expert I would guess that if retailers have a better than expected Christmas, then maybe it will be a sign of a turn-around not being to far-off.I just don't see how with so many people with no equity and credit so tight, that there will be a big splurge this year.

I don't see any chance of a better than expected holiday season -- retailers were placing their last round of holiday orders when the financial meltdown hit and they cut back big time. If year-to-year sales are flat, then having short supplies in stores might be enough to shore up retail prices.

But, given that retailers have already begun massive holiday discounting and doorbuster specials, seems that the early signs don't look good and they're bracing for the worst. And out here in Cali, this is all on top of the liquidation sales already underway at Circuit City (closing half of their Bay Area stores) and Mervyns (the venerable department store chain is going out of business).

[Woochifer]

I was in BB a few weeks back and it was dead, the least customer traffic than I've ever seen. I was in Toys-R-Us Saturday and you would have thought it was December. I couldn't get through some of the isles and the staff on the floor were very busy helping people. It would have been interesting to see if BB had picked up. Is this a sign things are picking up, is it that people are shopping early to be sure something is under the tree, maybe people have some confidence since the election went the way it did? The big question will this surge carry over to the electronics industry.

I believe that Toys R Us had their first holiday toy sale over the weekend. That would explain the crowds you witnessed. Other retailers had similar doorbuster sales last weekend. The holiday coupon books and circulars are arriving much earlier this year, and I've never seen so much deep discounting this early in November. Given that retailers have already cut back their inventory, they obviously have a pretty dim outlook for this quarter. If retailers can attract large November crowds into their stores and pare down their inventory, then they avoid having to go to firesale losses in December and January.

Electronics is getting hammered because it's regarded as more of a discretionary purchase than food, clothes, and yes, toys for the kids.

[Mr Peabody]

Running on a bare bone inventory is a "catch 22", assuming there might be shoppers ready to spend money, if the item isn't in the B&M stores, shoppers will resort to online purchases. This may not be a bad thing if they bought from the same business online but we all know that there are online retailers that under cut prices more than the big name stores websites.

I haven't done a lot of shopping, I have heard rumors of discounting, but from the shopping I have done, it is just something being thrown out there to create interest. I picked up a couple games for a Leapster and paid $20.00 each, this is the same price I paid back in July for them. It looks to me like they marked up to mark down. The sign said "normally $25.00". When looking for some kids clothes there weren't any discounts either, they were almost as high as mine. I think if people are aware of what things normally cost they will be disappointed to what is being called a "discount". Electronics may be different I haven't shopped for anything much. The Nintendo Wii seems stable but they are playing the market pretty wise by keeping a constant demand by trickling product to the market a little at a time. I imagine with the convert to digital TV around the corner that some serious competition to sell a TV will be going on.

[Woochifer]

Running on a bare bone inventory is a "catch 22", assuming there might be shoppers ready to spend money, if the item isn't in the B&M stores, shoppers will resort to online purchases. This may not be a bad thing if they bought from the same business online but we all know that there are online retailers that under cut prices more than the big name stores websites.

The scenario you describe is more the exception than the rule. As much pub as online retailing gets, it still constitutes far less than 10% of overall retail sales. Shoppers still prefer instant gratification and seeing something in person before buying. What happens on the B&M front is what drives the retail market.

The bare bone inventory is the retailers' expectation of how this holiday season will go. Some stores have already announced that they won't hire seasonal temps this year. If store overbuy, then they go deep into the red because of the discounting needed to move a large inventory of unsold goods. And to handle that kind of large volume in-store, retailers still need to hire seasonal employees.

I haven't done a lot of shopping, I have heard rumors of discounting, but from the shopping I have done, it is just something being thrown out there to create interest. I picked up a couple games for a Leapster and paid $20.00 each, this is the same price I paid back in July for them. It looks to me like they marked up to mark down. The sign said "normally $25.00". When looking for some kids clothes there weren't any discounts either, they were almost as high as mine. I think if people are aware of what things normally cost they will be disappointed to what is being called a "discount". Electronics may be different I haven't shopped for anything much. The Nintendo Wii seems stable but they are playing the market pretty wise by keeping a constant demand by trickling product to the market a little at a time. I imagine with the convert to digital TV around the corner that some serious competition to sell a TV will be going on.

That's the normal holiday pattern -- put some loss leaders out there to lure shoppers through the door and hope that they pick up a few extra items with higher margins. The difference is that this year, stores are doing the doorbuster specials and early bird pricing in early November.

You need to be aware of which stores are doing this, and look at the ads/circulars. Wal-Mart did their first holiday toy sale back in October, and had virtual mob scenes in their stores. We got the holiday toy catalog from Target about a week ago -- about two weeks earlier than usual.

I don't think that the digital conversion will be that big a deal until after the analog signals go dark in February. Even then, I'm not sure how many of them will opt for a new TV, rather than just buy a converter box. Right now, people who are aware of the transition are waiting for their $50 DTV converter box coupons to arrive (right now, it's about a four-week wait), and there are plenty of units priced right at $50. My understanding is that retailers are barely able to keep the DTV converters in stock because of high demand.

[pixelthis]

ITS RUMOURED that when word got out about the CC closures
trucks carrying Sony TV sets turned around and headed back.
AND BEST BUY wasnt just your imagination, their sales were down
47% last q.
A lot of people dont understand just how bad things are, for a retail outlet like CC to first close 155 stores during the busiest (usually) time of the year was an act of desperation, a hail mary pass in an attempt
to boost stock prices out of the cellar.
They are already calling this "black CHRISTMAS" or the year without a christmas, and this is dire, since most stores make most of their money during this season.
Electronics are especially going to be hard hit, since they are a durable goods item.
These toys may be essential to fanboys like those on this board,
but most can wait until times are better.
Food, rent, mortage will come first.
The worst thing is that most electronics are credit purchases and credit has dried up.
I have been on a cash only basis for several years, unless I hit a windfall I just cant pay out the bucks for something that I CAN GET BY WITHOUT FOR AWHILE.
Heck, my brakescost 430 bucks to get fixed recently.
A LOT OF people are in similar situations.
I am glad I am not in the electronics biz, people are selling what they have instead of buying new

[Mr Peabody]

Keep in mind CC was not on good ground going into whatever this is they are calling it, "economic down turn". Remember they were trying to find a buyer or merge with another company. There was the merge talk with Blockbuster for awhile and I think even Starbuck's.

When I worked for an electronics distributor our credit line was with the manufacturer themselves. If that was strained from slow pay or at it's limit I could see how maybe a loan from outside would help. We always got the ole back order story but little did we know the product didn't come in because the company needed to pay up. They eventually went out of business. Not room for distributors when the big box stores appeared and basically sold to the public at distributor prices.

I am impatient to a fault. I use credit for large purchases. Luckily, I also have a good measure of self control. I pretty much know what my budget can go so I don't borrow more than I can pay off in a reasonable time. I'd rather pay some interest and enjoy my purchase while I pay for it. That is also how I get my hands on gear I may not otherwise be able to obtain. Of course, this would be a bad practice these days when the job market is so unsecure.

I also feel it was a commin practice to loan people more than they should have received even before the mortgage melt down. I bought my house around 1995 and anxiously awaited if my loan was approved. Much to my surprise they came back with a figure much higher than I would have ever thought. I knew though what I could afford to pay out of my budget a month and bought within my means. I gave them all my info, I wondered what did they see I didn't, do I have more money than I thought. But what good is a larger fancier house if I couldn't afford some expendable income for other things the family might want or need. Like CD, DVD's and more stereo gear