Circuit City Throws in Towel

This isn't a story of Best Buy (NYSE:BBY) burying the competition, although they has a major role, it is more of a story of the success of Target (NYSE:TGT) and Wal-Mart (NYSE:WMT) putting the nails in the coffin.

Circuit City Stores Inc. filed for bankruptcy on Monday, about a week after it said it would close 20% of its stores. The Richmond, Va.-based electronics retailer has been struggling as nervous consumers spend less and credit has become tighter.

Chapter 11 protection typically allows a company to hold off creditors and operate as normal while it develops a financial reorganization plan. Circuit City listed its amount of assets at $3.4 billion and its total debts at $2.3 billion, according to a bankruptcy document filed with the court. About 168 million shares of its common stock are held by about 4,463 shareholders, according to the filing.

The company said it expects to have money to distribute to unsecured creditors, who get paid last. Circuit City said it had has more than 100,000 creditors. The largest single debt listed in the filing is $118.8 million owed to Hewlett-Packard Co.

Both Wal-Mart and Target recently and very aggressively enhanced their electronics department and were selling items at price points that Circuit city just could not match. With an untrained staff and higher prices than the competition, this outcome was determined months ago.