Circuit City braces for the worst, more upside for Best Buy?

Posted Nov 4th 2008 6:45AM by Zac Bissonnette
Filed under: Bad News, Best Buy (BBY), Circuit City Stores (CC)

Yesterday, Brian White wrote that Circuit City's death spiral begins: Closing 155 stores and exiting markets.

Of course, saying that that was the beginning of Circuit City's (NYSE: CC) death spiral is a bit like saying that the death spiral of the horse and buggy began when the Cadillac Escalade debuted. Circuit City has been reeling from a string of horrendous management decisions that began when then-CEO Phil Schoonover decided that a good way to cut costs would be to fire the company's top 3,400 salespeople.

The company needs a gangbusters Christmas season that seems unlikely given the economic environment. But in a catch-22 that would be funny if it weren't so pathetic, the company probably won't even have a chance. The Wall Street Journal reports (subscription required), "The "credit noose is tightening." That's a quote from RBC Capital Markets analyst Scot Ciccarelli. He noted that, "it's unlikely Circuit City will be able to get the inventory it needs for its remaining stores during the holidays."

Circuit City's demise is sad for all the hardworking rank and file employees.

On the upside, Best Buy (NYSE: BBY) is obviously poised to benefit from the decreased competition. Does that mean you should buy that stock? Probably not, given that it already bounced 3% on the news yesterday morning (it closed near $28), and given that the economic outlook is worsening. Long-term investors may want to keep an eye on it, however.

Tags: CC, Circuit City, CircuitCity