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Looks like consumer electronics retailer Circuit City Store Inc. (NYSE: CC) will be cutting costs in a pretty significant way by slashing over 3,400 store workers. Then, it will hire lower-paid employees to replace them. Nice, eh? In addition, the retailer stated that it will cut about 130 corporate jobs.
This is a move that will probably send Circuit City employees running for the exits once they hear that their "high-paid jobs" will be replaced by lower-paid workers. Circuit City officials went so far as to say that the store employees being let go had pay levels "well above the market-based salary range for their role." Sounds like Circuit City HR and compensation personnel are not doing their jobs if that was the case. I wonder how many of them will be let go?
In other news, Circuit City will be outsourcing its entire IT operations to International Business Machines Corp. (NYSE: IBM) to further cut technology-related expenses by an estimated 16%. So far, these layoffs come on the heels of Circuit City's announced plans to close quite a few U.S. and Canadian stores as the retailer struggles to get its cost controls in line with reduced sales and plummeting margins -- especially in the white-hot flat-panel TV market. Competitor CompUSA is also closing quite a few stores. Will Best Buy Co., Inc. (NYSE: BBY) be next?
Circuit City to cut more than 3,500 jobs
Posted Mar 28th 2007 2:35PM by Brian White
Filed under: Bad News, Management, Employees, International Business Machines (IBM), Best Buy (BBY), Circuit City Stores (CC)
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Reader Comments (Page 1 of 1)
3-28-2007 @ 3:17PM
Rockmann said...
From a bottom line standpoint in terms of wages, this probably makes a lot of sense. From a customer service level, this is probably the worst thing Circuit City can do and it could very well destroy them in a few years.
When I was 23 I became the youngest store manager, at the time, for a chain of auto part stores that was highly successful. One of the things management always strived for was employee loyalty and training. We sent them to classes, they built relationships with our supplier reps and we were extremely profitable. Had I been told to fire anyone who was paid well and replace them with new employees, I would have been no less than furious at management.
The same thing will happen with the store managers and instead of having a trickle down effect, this move by Circuit City will have a trickle up effect. Managers may not leave immediately, but you can bet that the Resume' Builder Professional, will be a hot seller amongst the management team. All the time management spent getting employees up to speed, educating them, training them on process and procedures, will have to be started again with the new employees. There is no doubt they will be able to fill the vacancies with bodies, but what kind of customer service will the customer receive?
My guess this will be the nail in the coffin for Circuit City. The last ditch effort to bring the company back to a profitability the shareholders can be happy with. As upper management realizes the employee slash and burn is not contributing to their bottom line, the next move will be severe discounting to get the sales numbers up at the expense of profitability. This will be great for consumers. If you are in the market for that huge 52" flat screen, this fall may see some great prices for that purchase. In the meantime, put money aside so you can pay cash and you'll be way ahead of the game.
Rockmann
http://www.creditdetox.com