What's Next for Circuit?

So Circuit City has filed for bankruptcy protection. What's in store for the nation's third largest consumer electronics retailer (after Best Buy and Wal-Mart)?

Prospects are not good, according to analysts quoted in This Week in Consumer Electronics. Some predict Circuit will continue to shrink, with further store closings over the current 155. Others say the process will eventually lead to complete liquidation, as was the case with CompUSA. Representative quote from Credit Suisse: "We have not seen a consumer electronics retailer successfully reorganize in Chapter 11 in our 24 years in this space."

Meanwhile, the bankruptcy court has granted Circuit's request for credit. That will allow manufacturers, to whom Circuit already owes hundreds of millions, to get paid up front, so at least some of them will continue shipping product to the chain. That will not prevent the stock from being de-listed from the New York Stock Exchange.

Circuit's woes present more than one problem to manufacturers. Whether those that are owed money will get paid remains to be seen. Analysts also note that retail survivors like Best Buy will gain increased leverage in their dealings with manufacturers, cutting deals that benefit the retailer more than the manufacturer.

For now, all eyes are fixed on what may be the final chapter of the Circuit City saga.

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