Circuit City Facing Bad Economy And Self Inflicted Wounds - Holiday Central

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It's a make-it or break it time for retailers. The holiday selling season is always a critical time for retailers, but this year this may be even more true. With several retailers already falling victim to a drop in consumer spending, and filing for bankruptcy, retailers will be navigating through some tricky waters. Consumers are strapped for cash due to high energy and food prices, and unemployment is rising. The recent credit crunch has made it more challenging for retailers and consumers to borrow.

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Apr.09

2:36 PM ET

Wednesday, 9 Apr 2008

Circuit City Facing Bad Economy And Self Inflicted Wounds

Posted By:Margaret Brennan

Topics:Stock Market | Consumers | Retail Sales

Sectors:Personal and Household Goods | Retail

Companies:Circuit City Stores Inc

Circuit City
Steve Helber / AP
A Circuit City store in Richmond, Virginia.
I was listening to the Circuit City conference call this morning and one headline really jumped out. Management said that the company is "assuming a recession in the first half of the year and a soft economy in the second half."

Of course, tighter consumer budgets aren't helping business BUT a lot of Circuit City's problems are, admittedly, self-inflicted. U.S. sales were down 8.8 percent to $3.45 billion and same-store sales sank 11 percent.

Still, Circuit City surprised many with posting its first quarterly profit in the past five quarters. Can it keep the momentum while growing the business without hacking away at staff and expenses? That's the question that investors including activist Mark Wattles, want to hear answered.

Unfortunately, we did not get those answers on today's call. CEO Philip Schoonover avoided addressing the changes that Wattles is demanding. Saying that the company will speak about those issues raised by Wattles at the appropriate time. I'm not sure when that will be but clearly the proxy battle is heating up.