Circuit City Bites the Dust

Circuit City (CC) announced that its vendors are refusing to play ball and are not increasing lines of credit for the Christmas season. As well they are announcing that the US government is not cutting a cheque for the $80 million dollar tax refund they have been waiting for.

Well I do not know much about taxes. But I do know that vendors know the business better than investors and commercial bankers. It is clear that Circuit city had a sales problem. It is also clear that retail is going to struggle this Christmas. Vendors are not stupid they knew they were going to have a hard time. So you have to pick winners and losers.

Circuit City was chosen to die. Sure they threw them a few morsels probably because the lawyers said you have to. But if the consumer is not taking out their wallets something has to give. Vendors do not want to be caught with their own brands in mass liquidation sales.

Six (6) months ago the stock traded over $5. Now it’s below $0.50. Watch for very well informed traders from vendor and associated companies selling or shorting the stock. What type of financial disclosure did Circuit city have to do for the Vendors. In the meantime wait for the January sales there should be some great bargains.