Circuit City Stores - The City Format

The City Format

In 2007, a new 20,000-square-foot (1,900 m2) store format was introduced as "The City" and designed to eliminate previously under-utilized space. The smaller format gave the company greater flexibility to enter new markets and backfill existing ones. Most new store openings in 2008 used this new store format.

On February 8, 2007, Circuit City announced that it planned to close seven domestic Superstores and a Kentucky distribution center to cut costs and improve its financial performance. News media reports also mention that 62 stores in Canada were to close.

Circuit City announced on February 23, 2007 that its Chief Financial Officer, Michael Foss, would leave the company. This unsettled investors and analysts concerned about management turnover. "This represents the third departure of a senior executive in the past six months, and the second departure of a top-five executive in the past month" said Goldman Sachs analyst Matthew Fassler in a client note. Chief Executive Office Phil Schoonover’s "hand-picked team is turning over faster than we would like to see in a turnaround situation."

In 2007, the starting wage for new employees was dropped from $8.75 an hour down to $7.40 an hour ($6.55 being the federal minimum wage at the time). In a press release on March 28, 2007, Circuit City announced that in a "wage management" decision in order to cut costs, it had laid off approximately 3400 better-paid associates and would re-staff the positions at the lower market-based salaries. Laid-off associates were provided severance and offered a chance to be re-hired after ten weeks at prevailing wages. The Washington Post reported interviews with management concerning the firings.

The Post later reported in May 2007 that the layoffs appeared to be "backfiring" and resulting in slower sales.

In April 2008, video rental firm Blockbuster announced a bid worth $1 billion to purchase Circuit City. In July 2008, Blockbuster withdrew its offer due to market conditions.

Philip J. Schoonover, CEO, President and Chairman of the Board of Circuit City Stores, Inc. announced his immediate resignation on September 22, 2008. James A. Marcum, former Vice Chairman of the board, was named acting CEO. Allen King was selected Chairman of the Board. This switch was said to be due to a stream of losses stemming from the rapid decline of flat-panel TV prices, and possibly due to the strong call for Schoonover's removal from activist shareholder Mark Wattles.