4 locals among Circuit City layoffs

[Neil D]

4 locals among Circuit City layoffs

Corporate plan cuts 3,400 higher-paid workers

By Coloradoan staff and news services

Four workers at the Fort Collins Circuit City store, 4414 S. College Ave., were laid off Wednesday as part of a corporate-wide plan to cut 3,400 higher paid workers and replace them with lower-paid new hires.

The plan, which openly targets better-paid workers, is risking a public backlash by implying that its wages are as subject to discounts as its flat-screen TVs.

The electronics retailer, facing larger competitors and falling sales, said Wednesday that it would lay off about 3,400 store workers - immediately - and replace them with lower-paid new hires as soon as possible.

Circuit City spokeswoman Jackie Foreman said the Fort Collins store would immediately begin work to fill those positions.

"This was not an announcement of a reduction in force," she said. "We will work to fill the positions."

Store officials in Fort Collins declined comment and referred all calls to their corporate offices in Virginia.

All workers will receive separation packages based on their length of service, Foreman said.

Including the four layoffs in Fort Collins, 38 workers were laid off from 12 Denver area stores.

The laid-off workers, about 8 percent of the company's total work force, would get a severance package and a chance to reapply for their former jobs, at lower pay, after a 10-week delay, the company said.

Analysts and economists said the move is an uncertain experiment that could backfire for the chain. The risks: Morale could sink and customers could avoid the stores. Also, knowledgeable customer service is one of the few ways Circuit City can tackle competitors that include Wal-Mart Stores Inc., they say.

"This strategy strikes me as being quite cold," said Bernard Baumohl, executive director of The Economic Outlook Group. "I don't think it's in the best interest of Circuit City as a whole."

While other companies, such as Caterpillar Inc., have introduced two-tiered wage systems, where newer workers make less, firing workers and offering to rehire them at a lower wage is very rare.

"I don't think you're going to find too many examples," of this, said Ken Goldstein, labor economist for the Conference Board, a business research group. "That certainly has not been a trend we've seen."

Circuit City, the nation's No. 2 consumer electronics retailer behind Best Buy Co. Inc., says the workers being laid off were earning “well above the market-based salary range for their role.” They will be replaced with employees who will be paid at the current market range, the company said in a news release.

“We haven’t done something called (a) wage management initiative before,” said company spokesman Jim Babb. “All companies at one time or another need to go through and make sure their cost structure works with market conditions.”

“The stock is up today on the news restructuring is going to help in short term,” said Morningstar Inc. analyst Brady Lemos. “Longer term, they could face challenges.”

Circuit City lost money in its most recent quarter and on Wednesday lowered its 2007 revenue guidance for the second time. A store in Falls Church, Va., started cutting hours after the Christmas rush ended, said Imane Eljacifi, a Verizon Wireless employee who has worked for about three months at a kiosk located inside the Circuit City there.

After the cuts, many of the employees, mainly teenagers, left for other jobs where they could get more hours.

“The Circuit City customers were wandering around and would start asking us for help,” Eljacifi said. “That’s what I’ve witnessed and I hate about the whole situation.”

Customers at the store questioned the move.

“I don’t think it’s fair,” said Hamilton Smith, an 88-year-old retired federal worker who had just purchased some batteries at Circuit City. “You need to give people a living, working wage.” He said he would think twice before shopping at the company’s stores again.

Circuit City’s cuts come at a time when other retailers are trying to put more knowledgeable workers on store floors. Home Depot Inc., whose new chief executive is struggling to reignite sales growth at its stores, said it has raised pay to attract skilled tradespeople, such as carpenters and electricians.

Home Depot is adding 15,000 new jobs this year, according to spokesman Jerry Shields.

Circuit City’s move, by contrast, “shows they’re positioning for another tough year,” said Timothy W. Allen, a Jefferies & Company Inc. retail analyst. Not only will service levels at the store suffer, he said, but “you’ve lost 3,400 customers-slash-employees.”

[Dr. Shane]

No backlash will happen. The only thing that will happen is more people will buy more stuff at Circuit City.

[Kountzer]

The last few times that I was in Circuit City the place looked empty. Fry's electronics on the other hand, keeps a lot of customers, or so it seems.

Micro center, off W loop, near San Felipe in H town, is the best computer store around, IMO.

DB