Tuesday, October 28, 2008

Circuit City and Tweeter nearing the deadpool?

A cover article in this week's TWICE (This Week in Consumer Electronics) Magazine examines the impact of possible store closings or even bankruptcy by Circuit City and Tweeter. Together, the two companies represented around $11 billion of consumer electronics sales in the U.S. in 2007. Circuit City is by far the bigger of the two, and is by far the bigger issue. The TWICE article quotes a Wall Street Journal article that speculated that "Circuit City might be forced to close more than 20 percent of its stores and liquidate $350 million in inventory to keep the company afloat through Christmas...".

For consumers, the two companies' problems could be a holiday bonanza, with competitive retailers such as Best Buy and Wal-Mart forced to match Circuit City's and Tweeter's prices in order to sell their own inventories. For competitors, however, a massive restructuring or bankruptcy of either company could turn what's already likely to be a bad Christmas season into a disastrous one. Consumer Electronics manufacturers and distributors are also suffering, since many retailers are cutting back on inventories and even dropping entire product lines. Seasonal employment will also suffer--Circuit City and Tweeter are unlikely to do much seasonal hiring if they're on the brink of bankruptcy.

So, if you're looking for a big-screen TV, iPod or PC, stand by to stock up on bargains that are likely to continue throughout the entire Christmas buying season. If you're in the Consumer Electronics business, stand by to stock up on Maalox.
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