Circuit City to leave metro Atlanta

Goodbye, Circuit City. Hello, Wal-Mart, Best Buy and Apple Store.

Welcome to the new consumer electronics landscape after Circuit City announced it will pull out of the Atlanta market.

Circuit City, the 60-year-old Richmond, Va.-based consumer electronics chain that also founded CarMax, is succumbing to the current economic climate and could be close to bankruptcy, according to Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting and investment banking firm in New York.

“If you’re Best Buy or Wal-Mart, you’re celebrating,” said Davidowitz, who believes Circuit City could be on the verge of following Linens ‘n Things, Value City, Shoe Pavilion and Mervyns into bankruptcy and liquidation.

On Sunday, Circuit City announced it will close all 16 Atlanta stores and stores in Macon, Warner Robins and Athens. Georgia will have only a handful of Circuit City stores left, including sites in Rome and Columbus.

On Wednesday, all Atlanta stores will begin liquidating their inventory. Stores in Atlanta will be closed today to prepare for the liquidation, said Circuit City spokesman Bill Cimino. He said stores will go out of business as they exhaust their inventory, most likely by the end of the year.

Customers are being asked to pick up any items in the stores that were being repaired.

In the future, customers with warranties, gift cards and store credits will need to contact Circuit City through its Web site, the toll-free number or through other stores (though the nearest one will be 60 miles from Atlanta).

In all, Circuit City is closing 155 stores and abandoning 12 U.S. markets. That represents about 17 percent of its work force and 22 percent of its U.S. stores.

Another 565 Circuit City stores will remain open in the United States.

The $11.3 billion chain was unable to maintain enough credit to stock its stores for the holidays at the same time that slow consumer spending cut into sales, the company said Sunday.

Davidowitz, however, believed Circuit City’s issues started 15 years ago when it founded CarMax. Circuit City was the largest consumer electronics retailer.

“But while they were building their auto business and pouring all their money into it, good ol’ Best Buy kept their head down and now has more attractive stores, better locations and better service, like its Geek Squad,” said Davidowitz.

He likened it to Atlanta-based Home Depot, which took its eye off its stores to found HD Supply (a division it sold last year) while Lowe’s crept up in market share.

(CarMax was spun off and now is a public company.)

“It doesn’t take a lot of bad decisions to ruin a retail chain,” said Davidowitz.

The changes have been swift —- all Atlanta locations already have been removed from Circuit City’s online store locator, and online customers were being referred to the phone and Web. The stores will stay open during liquidation.

Circuit City emphasized that its warranties are secured by third-party financial institutions, such as GE Capital.

Circuit City employees, however, aren’t as lucky. They are not being offered a severance package.

Richfield, Minn.-based Best Buy has 28 stores in Georgia and could get a windfall from Circuit City’s customers.

Davidowitz said that the biggest winner in electronics right now is Apple, which has the “highest productivity” in sales, for an average $2,000 a square foot at its stores, followed by Best Buy’s $800 a square foot. Wal-Mart, he said, is now quietly gaining ground, carrying more electronics.

Meanwhile, CompUSA is closing all its stores, and Tweeter is in bankruptcy.

Still, it may seem odd that Circuit City would close stores in Atlanta, a sought-after retail market with a young and affluent population. In the end, it comes down to simple math, said another retail expert.

“Obviously, there were not enough people shopping at Circuit City for them to keep the stores open in Atlanta,” said Randy Stuart, an assistant marketing professor at Kennesaw State University’s Coles College of Business.

Circuit City said the stores it is closing generated approximately $1.4 billion in net sales in the last fiscal year, but on average had lower net sales, lower gross profit margin and were unprofitable when marketing expenses were compared to store results.

Circuit City stock closed Monday at 35 cents a share, up 9 cents.