As everyone knows, Circuit City cut prices on big screen televisions during last year's Christmas holiday and the result didn't sit well on the bottom line. Then the company decided it needed to lay off 3,400 of its highest paid and, some say, most productive store employees so it could replace them with others making a lot less. Now, the company has decided to eliminate 200 jobs at its headquarters and approximately 650 other manager-level workers in its stores.
Circuit City's CEO Philip Schoonover told The Associated Press that the company was in the second part of a three-phase plan to turn the itself around.
Mr. Schoonover said Circuit City is acting with a "sense of urgency" to current conditions and "making some tough decisions on some things that we won't do anymore."
Scot Ciccarelli, an analyst with RBC Capital Markets, explained Circuit City's moves in a report to investors. The company, he wrote, "continues to reduce its cost structure to cope with a tough environment, but these cuts may further degrade the company's market share."
Circuit City sees the current retrenchment as a temporary situation. The chain is looking to open 165 new stores over the next two years and focus on building its online business. It also plans to grow its Firedog home-installation and computer service and repair unit.
Discussion Question: What is your analysis of where Circuit City currently stands and what it must do to turn itself around?