With consumer electronics and appliance retailers Retravision and Clive Peeters struggling to survive in the Australian market analysts are now claiming that one of the biggest CE retailers in the US Circuit City is set to enter Chapter 11 bankruptcy protection.
KeyBanc Capital Markets claimed yesterday in a report to investors “We believe a Circuit City bankruptcy has become a question of ‘when’ rather than ‘if,'” analyst Bradley Thomas wrote.
In Australia Clive Peeters is struggling with their shares now sitting at $0.38 which is 81% down on where they were in January 08. Gerry Harvey the CEO of Harvey Norman said of Clive Peeters “They are struggling and will find it hard to survive. Appliance sales are at a standstill with consumers only buying if they have to”.
Four distributors have admitted that they have tightened credit terms with the retailer. Recently electrical retailer Retravision said it was considering merging three main divisions, as it looks to reduce costs and boost its buying power. The boards of the company’s northern, western and southern divisions are considering a national merger after the sale of the RT Edwards chain. That chain accounted for 25% of the annual volumes of Retravision (Northern).
Tim Cockayne, CEO of Retravision (Southern), was quoted as saying that the consolidation plan has merit and “that’s why the board is looking at it”. One of the options that were suggested was a merger with rival BSR Group (Betta Electrical).
According to reports by Associated Press and reported by TWICE , Bradley said the challenging economic environment is accelerating Circuit City’s trajectory toward Chapter 11, and will also diminish the likelihood that it can emerge from bankruptcy. He claimed that vendor support remains “the wild card” in the equation. “If one major vendor were to cut off Circuit City, we would expect others to quickly follow suit,” he wrote.
Best Buy would be a direct beneficiary of a Circuit City bankruptcy, Bradley added, which would outweigh the impact of falling TV prices and cutbacks in consumer spending.
Late yesterday as the share market rallied key consumer technology retailers shares rose JB Hi-Fi, was up 37 cents to $10.37 a rise of 3.7 per cent. Also on the up was Radio Rentals whose shares rose to 52 cents, up 4 per cent. Harvey Norman shares dropped 2 cents to $2.58.
