The chief executive at Circuit City Stores Inc. stepped down Monday and was replaced by a board member appointed to defuse a fierce proxy battle as the struggling electronics retailer steps up its turnaround effort.
Philip J. Schoonover, Circuit City's chief executive, chairman and president, had joined the company in 2004 from rival Best Buy Co., where he was executive vice president of customer segments.
The 48-year-old will be replaced by board member James A. Marcum, who will stand in as the chain's interim president and chief executive. Meanwhile, former tobacco executive Allen B. King will become Circuit City's new chairman.
"A change in leadership at the chief executive officer level is always a difficult decision, and Circuit City appreciates Phil's efforts over the past four years," King, 62, said in a statement.
Marcum, 49, was an executive at merchant banking firm Tri-Artisan Capital Partners who was one of three directors elected to Circuit City's board this summer as part of a deal to defuse a proxy battle with Mark J. Wattles, whose investment firm holds a 6.5 percent stake in the company. Last month, Marcum was appointed Circuit City's vice chairman.
In April, Wattles sent a letter to the company's board saying it should replace Schoonover and make other changes to help "unlock hundreds of millions of value." Wattles had called turnaround efforts under Schoonover "disastrous."
The Richmond-based retailer, which is scheduled to report quarterly results on Sept. 29, is considering whether to sell the company as it continues on a multiyear turnaround plan.
King said he hopes Monday's changes boost that effort.
"The board of directors is committed to accelerating the pace of the company's turnaround," he said.
Circuit City spokesman Bill Cimino said despite the company's forecast of stronger-than-expected earnings for its fiscal second quarter, the board felt "at the end of the day more needed to be done."
Circuit City has seen only one profitable quarter since the second quarter of 2007. Schoonover had continuously defended the turnaround plan despite some acknowledged missteps and had asked shareholders for more time.
In May, Circuit City announced it hired Goldman Sachs & Co. to explore strategic options, but has never given an official timetable for any action. That move came as the retailer opened its books to Blockbuster Inc., which had made a takeover bid of more than $1 billion for the company. But in July, the Dallas-based movie-rental chain withdrew its bid because of market conditions.
Blockbuster had proposed the deal with plans to create a 9,300-store chain to sell electronic gadgets and rent movies and games.
RBC Capital Markets analyst Scot Ciccarelli wrote in a note to investors Monday that the change in leadership can't be viewed as a surprise.
"Circuit City's business has deteriorated dramatically over the last two years and although we do not lay the blame entirely on his shoulders, we do believe that some of Mr. Schoonover's decisions definitely had a significantly negative impact," Ciccarelli wrote.
Ciccarelli pointed to the March 2007 layoff of about 3,400 retail workers. Circuit City had said it would cut costs by replacing those workers with lower-paid employees.
Circuit City operates nearly 700 U.S. stores and 775 stores and dealer outlets in Canada.
Also Monday, Circuit City said it will likely post stronger-than-expected results next week for the quarter ending Aug. 31. The company says it now expects its loss from continuing operations to be between $170 million and $185 million for the quarter. That figure excludes any one-time charges.
Ciccarelli said the company is still heavily dependent on its vendor base for funding and Circuit City may be at risk of having this funding tightened "if the holiday season goes poorly."
Analysts surveyed by Thomson Reuters expect Circuit City to post a net loss of $1.04 per share on revenue of $2.55 billion.
Circuit City shares climbed 15 cents, or 8.8 percent, to $1.85 in after-hours trading after closing at $1.70 earlier Monday.
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