Economic Update — Bye Bye, Circuit City
- Mar 09, 2009
Sunday was the last day of business for former electronics giant Circuit City, which could well become a lesson for business school students of the future in how to fail as a big, even category-dominating, retailer. The recession, of course, was a large nail in its coffin, but other nails were supplied by the company itself: bad real estate decisions, bad merchandising decisions, and the infamous decision only two years ago to toss its best salespeople and replace them with cheaper hires of questionable quality. The closing day represented an accelerated liquidation pace for Circuit City, so much so that the company tasked to sell off the inventory, Great American Group, issued a press release recently that bragged that “we’re ahead of schedule in closing many of the store locations.” The end of Circuit City leaves more than 500 empty big boxes nationwide, a considerable headache for retail property owners. Best Buy Co., on the other hand, sees the demise of its once-fierce competitor in a somewhat different light. “The near-term the opportunity is clear,” noted Brian Dunn, CCO and incoming CEO of Best Buy. “We have an opportunity to earn that business that had previously been shopping with Circuit City, and we intend to be very focused in targeting that customer group.” In other retail news, Whole Foods Market Inc. is planning to sell 31 Wild Oats stores in 21 states that it bought in 2007 to settle government antitrust challenges to the acquisition. At the time the Federal Trade Commission challenged the deal, the agency said it would “mean higher prices… and fewer choices for consumers.” That may or may not have been the case in 2007. More recently, however, consumers have been voting with their feet about Whole Foods. For the company’s fiscal 1Q09 (ended January 18, 2009), comparable store sales decreased 3.4 percent from fiscal 1Q08. The demand for free-range, carefully slaughtered meat, organic salads and supplements to boost every conceivable bodily function may have peaked with the bubble economy. The aggregate U.S. unemployment rate hit 8.1 percent as of February, according to the U.S. Department of Labor, the highest rate since the early 1980s. But there are differences between now and then. In December 1982, for example, 12.1 million people were jobless out of a workforce of 111.1 million; last month, 12.5 million were out of work in a work force of 154.2 million. The Dow Jones Industrial Average ended up for the day on Friday–32.5 points, or 0.49 percent–but down 7.1 percent for the week as a whole, and currently at its lowest level since 1996. The S&P 500 likewise gained a smidgen on Friday, 0.12 percent, but went down 6.2 percent last week. The Nasdaq, down 0.44 percent on Friday, is now at its lowest level since 2002, back in the tech trough. The tech sector, the biotech parts of it anyway, got something of a boost late last week on the news that President Obama will end the federal ban on stem-cell research this week.