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Electronics retailer Circuit City goes belly up after 60 years

CIRCUIT City Stores Inc, the bankrupt consumer-electronics chain, started going-out-of-business sales at its 567 United States stores on Saturday, the beginning of the end for a retailer that began selling televisions in 1949.

Revenue declines that started when Best Buy Co and Wal-Mart Stores began offering TVs and computers at lower prices deepened as the US entered a recession and vendors demanded Circuit City pay up-front for their goods. On November 10, the Richmond, Virginia-based chain filed for bankruptcy protection after suppliers cut off credit.

At the time, Circuit City, which employs more than 30,000 people in the US, planned to continue operations after exiting Chapter 11. Negotiations with prospective buyers failed, and Friday the company said it had agreed to hand its US merchandise to a group of liquidators, Bloomberg News reported.

"You hate to see stores go out of business," said Tom Kinley, 51, a social worker who was shopping for a surge protector in a Chicago Circuit City on Friday. "It feels a little scary. It just feels like things are slipping away."

Rivals' shares jump

Great American Group WF LLC, Hudson Capital Partners LLC, SB Capital Group LLC and Tiger Capital Group LLC won the liquidation rights in a court-sanctioned auction. Circuit City estimated the value of its inventory at US$1.2 billion to US$1.3 billion, and creditors are guaranteed 70.5 percent. Stockholders will probably get nothing, Circuit City said in a statement.

Best Buy, the biggest US consumer-electronics retailer, and regional chains such as Hhgregg Inc and Conn's Inc stand to benefit most from Circuit City's departure, according to Scott Tilghman of Hudson Square Research. Regional chains may gain "disproportionate market share relative to their sizes," the analyst said in a note to clients.

Best Buy jumped US$2.39, or 8.8 percent, to US$29.53 on Friday in New York Stock Exchange composite trading, while Hhgregg rose 5.7 percent and Conn's gained 11 percent.

Next to the Best Buy on Fifth Avenue in New York, shoppers entered a Circuit City branch throughout the day to inquire about the liquidation, the store's manager Jeff Struble said on Friday.

The going-out-of-business sales will end by March 31.

The liquidation agreement, approved Friday by a judge, came a day after the company held another auction described in court papers as its last chance to survive bankruptcy as a smaller chain.

"Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders," James A. Marcum, acting chief executive officer of the firm, said in the statement.


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