revealed plans Wednesday to slash a sizable chunk of its operations, one day after a hedge fund offered to acquire the company in a $3.2 billion leveraged buyout.
The electronics chain will shut 19 underperforming stores, five regional offices and a Virginia distribution center by the end of February. The 19 stores on the chopping block accounted for $170 million in revenue in 2004, and the company expects to record a charge of $30 million in the fourth quarter related to the restructuring.
Circuit City also said it sold a building that's part of its corporate headquarters. It expects the sale to yield an after-tax gain of about $1.8 million and to eliminate $12.6 million in long-term debt.
The regional offices employ a small number of people, while the stores employ about 370 full-time and 540 part-time workers. Some of them may be able to get jobs at other Circuit City stores in their area, the company said. It's unlikely that the 60 employees at the distribution center will find jobs elsewhere with Circuit City, since the company has no other distribution facilities in the area.
"The repositioning of our stores within these markets continues, and it no longer makes financial sense to keep some of the stores in those markets open," said Circuit City Chief Executive W. Alan McCollough in a statement.
The retailer's management is considering an offer from Boston-based Highfields Capital to buy the company in a $3.24 billion deal that would take it private and return $17 a share to shareholders. Highfields, which owns about 7% of Circuit City, expressed dissatisfaction with management's progress in turning around the company's performance so it can effectively compete with its chief rival,
. In a letter to management, the firm said that freeing Circuit City from the increased scrutiny of the public market would allow it to take the necessary steps to turn its business around.
The company said its restructuring plans were not related to the buyout offer.
Shares of Circuit City were recently down 7 cents, or 0.4%, to $16.46.