Consumer electronics retailer Circuit City Stores, Inc. announced the closing of 19 Superstores, five regional offices, and one distribution center by the end of February 2005, as well as the sale of a corporate building, continuing its initiatives to improve the company's overall financial performance.
"Based on our continuing analysis of markets across the country, we have identified 19 Superstores located in trade areas that we believe can no longer support a Circuit City Superstore, leaving the locations with no reasonable expectation of positive cash flow and without relocation opportunities over the near term," said W. Alan McCollough, chairman and CEO of Circuit City Stores, Inc. "In many of the larger markets in which we are closing stores, we have added incremental stores in more vital trade areas or relocated stores to more attractive sites. The repositioning of our stores within these markets continues, and it no longer makes financial sense to keep some of the stores in those markets open."
In the fourth quarter of the current fiscal year, Circuit City expects to incur expenses of approximately U.S. $30 million after tax in conjunction with the store and regional office closings. The 19 stores combined had revenues of $170 million for the 12-month period ended Dec. 31, 2004.
In addition to the store closings, the company will close a distribution center located in Doswell, VA, U.S. The 400,000-sq-ft facility will close by February 2005. Expenses associated with the distribution center closing are not expected to be material. After a transition period, the company expects a reduction in inventory as the company shifts store replenishment distribution to its other nine distribution centers.
The company also sold one of the buildings at its corporate headquarters campus to Perimeter Center, LLC., an affiliate of Daniel Realty. The 188,120-sq-ft building, known as Deep Run II, opened in July 1994. The transaction resulted in a gain of approximately $1.8 million after tax, and the elimination of $12.6 million of long-term debt associated with the operating lease arrangement from the company's consolidated balance sheet.
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