Is This The End of Circuit City?

Implications: Credit managers are extremely nervous right now about many things outside of their control.  One thing they can control is limiting their risk.  Making the decision to cut off, or fatally limit, the credit of a long standing and large customer like Circuit City may be a hard decision to make, but with this change in recommendation by credit rating firm Bernard Sands, it just got much easier.

Analysis: Having a conversation with the sales team about cutting off credit to Circuit City may not be pleasant, but it beats potentially loosing millions of dollars (and your job).

Many credit managers will tell you that when a report comes out like this, their hand is forced - the decision is out of their hands and they can no longer extend credit. At another time, receivables insurance or factoring could be an option, but right now it seems out of the question. Nor is Circuit City in a cash position to self finance the inventory they need for the holidays.

While CC senior management is assembling a team of "advisors" to review their options, things in-store are deteriorating fast - dirty products, disorganized and often, disconnected, product displays and disinterested de-motivated salespeople seem to be the norm, and on each store visit it appears worse.

If the inventory flow slows down in the most important selling season of the year, unfortunately the only thing the stores will be in a position to execute with credibility is a going-out-of-business sale.