Monday, 10 November 2008

Circuit City files for bankrupcy

Any lover of electronics (like me) who has ever visited the US (many times) will shed a tiny tear that Circuit City has today filed for Bankrupcy. They are the second largest electronics retailer in the US (after Best Buy) and the biggest US retailer to fail in the current crisis (so far).

Of course, the reasons are pretty obvious. But it was the refusal of its suppliers to provide stock for the Christmas season that finally done it for them. Indeed, the FT quotes HP, Samsung and Sony as the largest unsecured creditors.

As several UK IT Services found when Lehman’s failed last month, the consequences of such failures can be widespread; hitting seemingly strong companies as well as the weak. So all companies respond by tightening credit terms (in the case of some suppliers to retailers by refusing credit at all). That just hastens the day of reckoning for many.

Unfortunately, I expect to be writing many more pieces like this in the months to come. The aim of many will be to get through Christmas. But if past recessions are anything to go by, January will be a bloody month.

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