Circuit City’s Stock Price Gets Zapped. Not A Shock.

Sorry for all the bad puns, but hey, a bad brand deserves bad puns. I wrote back in March about Circuit City’s decision to fire 3000 employees, the ones who were the most knowledgeable on the sales floor. Of course, at the time, it was a way to make Wall Street happy by lowering costs and boosting profits.
Well, Wall Street is not happy. From the Chicago Tribune:

Shares of Circuit City Stores Inc. lost more than a quarter of their value Friday after the firm posted a wider-than-expected third-quarter loss and said it wouldn’t make money this quarter either, prompting analysts to question whether it should hang out a “for sale” sign.
The stock fell $1.91, or 28.7 percent, to $4.75, on the New York Stock Exchange. It was the biggest drop since February 2002.
“Clearly, we are very disappointed,” Chief Executive Philip Schoonover told analysts during a conference call. He said the company underestimated the financial impact of cost-saving initiatives on sales.
Analysts were clearly disappointed. The results were “absolutely astonishing to us,” said Christopher Horvers, an analyst at Bear Stearns & Co. “If they don’t turn around in the fourth quarter, it will raise the likelihood that this company goes down a dark path.”

Well, it’s not astonishing to me. The in-store experience is one of the most important things they have. Getting rid of 3000 smart workers wasn’t the answer. They’ve killed their brand.
When will corporations and marketers realize that cutting costs isn’t always the answer to their problems?

UPDATE: Oh, and you don’t think losers at the top get rewarded? Try this announcement from Wednesday:

Circuit City Stores Inc, which is working to turn around its business, has approved cash awards designed to retain upper-level executives over the next few years, the electronics retailer said in a federal filing on Wednesday.
A U.S. Securities and Exchange Commission filing said the company’s board approved the retention awards of $1 million for executive vice presidents and $600,000 for senior vice presidents. The awards are effective as of January 1, 2008, and vest over a three-year period.
In the filing, Circuit City said the awards were intended “to ensure the stability of the company’s leadership team by providing an incentive” for the officers to stay.

Wonder if they’ll still be in business three years from now.



About Dan Goldgeier

Dan Goldgeier is a Seattle-based freelance copywriter with experience at advertising agencies across the U.S. He is a graduate of the Creative Circus ad school, and currently teaches at Seattle's School of Visual Concepts. Dan is also a columnist for and the author of View From The Cheap Seats and Killer Executions and Scrubbed Decks.