If the story of retail giant Circuit City was a book, Chapter 11 was a section it had certainly hoped would be skipped. Just one short week after news that the retail chain would be closing up shop in 155 of its locations, Circuit City has now announced that it will reorganize under Chapter 11 bankruptcy. Under the protection of Chapter 11, Circuit City should be able to continue paying salaries and providing benefits to its employees as well as honor all current customer programs including returns, exchanges and gift cards. A blurb from James A. Marcum, vice chairman and acting president:
We recently have taken intensive measures to overcome our deteriorating liquidity position. The decision to restructure the business through a Chapter 11 filing should provide us with the opportunity to strengthen our balance sheet, create a more efficient expense structure and ultimately position the company to compete more effectively. In the meantime, our stores remain fully operational, and our associates are focused on consistent and successful execution this holiday season and beyond.
The good news in all of this is that locations not affected by the aforementioned closures will remain open for business during the reorganization, provided the Bankruptcy Court grants Circuit City’s request to remain operational as expected. As the economic struggles in this country continue, we can only hope a Chapter 11 reorg will be successful in stabilizing the retailer’s business and might prevent further layoffs as Circuit City begins a long and difficult climb out of its horrible current financial situation.