By Ashley M. Heher

The Associated Press

Shares of beleaguered electronics retailer Circuit City Stores Inc. briefly rose Monday after a report said the chain may close at least 20 percent of its stores to shore up its finances and avoid filing for bankruptcy protection. By day's end, the company's stock was down, however.

Citing "several people familiar with the matter," The Wall Street Journal said the nation's second-largest consumer electronics chain was considering closing at least 150 locations and slashing thousands of jobs to avert a Chapter 11 filing.

Closing dozens of stores would allow the Richmond-based retailer to liquidate $350 million in inventory that could be used to pay real-estate costs, including leases on abandoned sites.

Hampton Roads has five Circuit City stores: Janaf Shopping Center in Norfolk; the Greenbrier area in Chesapeake; Portsmouth Boulevard near Chesapeake Square Mall in Chesapeake; South Independence Boulevard near Town Center in Virginia Beach; and the Oyster Point area in Newport News.

Jim Babb, a Circuit City spokesman, said the chain wouldn't comment on the details of the report or rumors . He said the chain continues "a comprehensive review of all aspects of our business" in order to accelerate its turnaround plan and boost its financial and operating performance.

"As previously announced, this includes assessing the productivity of our asset base and making decisions that are in the best long-term interest of Circuit City and our stakeholders," Babb said in a statement Monday.

Investors appeared pleased at the report, sending the company's shares up more than 20 percent in morning trading and providing a small gain for the stock that's lost more than 90 percent of its value this year. But shares closed down 4 cents, or 10.3 percent, to 35 cents.

Standard & Poor's analyst Michael Souers said he was maintaining his "Hold" rating on the retailer, but slashed his price target in half to $1.

While S&P applauds Circuit City for its efforts to stay solvent, "we remain highly pessimistic on holiday sales, and on consumer spending in 2009," he wrote in a research note to investors, adding that he was maintaining his projections that the company would lose $2.65 per share in 2009 and $2.48 per share in 2010.

The company, which is in the midst of a comprehensive review as it works to operate as a standalone business while exploring strategic alternatives, has had only one profitable quarter in the past year. It posted a wider second-quarter loss last month with a 13.3 percent decline in same-store sales.

The results came after Circuit City replaced its CEO and withdrew its outlook for the full year because of traffic declines and stronger competition .

In May, Goldman Sachs & Co. was hired to help the retailer explore strategic options amid a now-withdrawn $1 billion takeover bid from movie-rental giant Blockbuster Inc.

The Journal reported that Circuit City hired Skadden, Arps, Slate, Meagher & Flom LLP as its bankruptcy counsel earlier this month . The newspaper also said the company hired FTI Consulting Inc. to develop a turnaround plan and has retained investment bank Rothschild Inc. to lead discussions with banks and acquire emergency financing.

Pilot writer Carolyn Shapiro contributed to this report.

ongoing troubles

Circuit City has had only one profitable quarter in the past year. It posted a 13.3 percent decline in same-store sales in the second quarter.

Originally published by BY ASHLEY M. HEHER.

(c) 2008 Virginian - Pilot. Provided by ProQuest LLC. All rights Reserved.

A service of YellowBrix, Inc.