Management Turnover as Change Agent

Wednesday, April 2, 2008

CEO Watch - Philip Schoonover, Circuit City, Update 2

Circuit City, the embattled electronics retailer, (check my earlier blogs) continues to face pressures from numerous sides. Chris Wattles of Wattles Capital Management, a major shareholder in the firm (approximately 6.5% of shares) has remained a thorn in Schoonover's side for some time.  Today he made a new call for the CEO's head as well as a number of other changes.  In a letter to Circuit City's board of directors Wattles stated,
We are confident that, with the right senior management team, the right strategy and the right focus, Circuit City can overcome its operational problems and turnaround its struggling business. WCM's primary goal is to help restore investor faith in Circuit City and unlock the Company's significant unrealized value by pushing for the following immediate

    -- Replace the current Chairman and CEO with a seasoned executive capable
       of restoring credibility with employees, vendors and stockholders;
    -- Focus on the "customer experience" and strategies for making the
       current stores more productive;
    -- Begin addressing the actual issues facing the Company and drive revenue
       growth, rather than focusing on cost-cutting strategies and "spin"
    -- Focus on the most immediate and least capital-intensive opportunities
       to improve the health of the business; and
    -- Develop and articulate a deliverable promise for the new "The City"
       brand that works within the realities of the current store footprints.
While Wattles' pressure is unlikely to result in getting Schoonover's head in the near-term, the current CEO's timeframe for success appears to be shrinking.  Continue to keep a close eye on how Circuit City responds to Wattles' pressure and the firm's shrinking profits and options for turning the company around. 

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