The company said it decided to file for bankruptcy protection because it was facing pressure from vendors who threatened to withhold products during the holiday 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 for Chapter 11 protection, 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 Richmond, Va.-based Circuit City fell 14 cents, or about 56 percent, to 11 cents on Monday before being halted.
Circuit City, 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. The company laid off about 3,400 retail employees last year and replaced them with lower-paid workers, a move analysts said could backfire, hurting morale and driving away customers.
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.
"Without immediate relief, the