It said it decided to file for bankruptcy protection because it was facing pressure from vendors who threatened to withhold products during the holiday shopping period. The company also said it cut 700 more jobs at its headquarters, after announcing a week ago that it would close 20 percent of its stores and lay off thousands of workers.
Circuit City filed under Chapter 11 of the bankruptcy code, which will allow it to hold off creditors and continue operations while it develops a reorganization plan. Its Canadian operations also filed for similar protection.
Doing so "should provide us with the opportunity to strengthen our balance sheet, create a more efficient expense structure and ultimately position the company to compete more effectively," James A. Marcum, vice chairman and acting president and chief executive, said in a statement.
Shares in Circuit City fell 14 cents, or about 56 percent, to 11 cents on Monday before being halted.
The Richmond, Va.-based company, which has had only one profitable quarter in the past year, has faced significant declines in traffic and heightened competition from rival Best Buy Co. and others. While the retail industry overall is facing what's expected to be the weakest holiday season in decades, Circuit City's struggles have intensified as nervous consumers spend less and credit has become tighter.
In court documents, Chief Financial Officer Bruce H. Besanko said three factors led to the bankruptcy filing: erosion of vendor confidence, decreased liquidity and the global economic crisis.