Circuit City (NYSE: CC) will face more downward pressure on its shares when it is booted from the S&P 500 next week. A number of large institutional investors sell-off holdings in companies which are not in the index.
The company faces another problem. It suppliers are starting to get nervous. According to The New York Post "If manufacturers and distributors start to yank credit and demand cash payments for shipments of flat-screen TVs, video games and iPods, it could precipitate a "downward spiral," said Scot Ciccarelli, an analyst at RBC Capital Markets."
Shares in Circuit City, which traded at over $30 less than two years ago, now change hands at $4.38. In the quarter ending November 30, the retailer had an operating loss of $207 million on sales of just over $2.9 billion. The company’s cash position dropped to $483 million from $740 million in the period ending February 28, 2007. The company does not have much of a balance sheet buffer to cover deepening losses.
Stick a fork in it, Circuit City is done.
Douglas A. McIntyre
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