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 user 2009-01-19 at 11:43:49 am Views: 42
  • #20872
    Circuit City closure a blow to Lexmark
    City, the nation’s second-largest electronics retailer, said Friday it
    will shut down its remaining U.S. stores, a blow to Lexington printer
    maker Lexmark International, which counted Circuit City among its
    largest retail partners.Circuit City is folding after it was unable to
    find a buyer for the chain; it had already filed for bankruptcy
    protection.Without a buyer, Circuit City executives had hoped to
    refinance the chain’s debt, but the hobbled credit market and consumer
    worries proved insurmountable.

    Lexmark’s rating could be lowered
    Standard & Poor’s analyst said Thursday that Lexmark’s credit
    rating could soon be downgraded.Analyst Philip Schrank said the
    decision links to Lexmark’s announcement this week that its
    fourth-quarter earnings will be lower than expected when announced
    later this month.A Lexmark spokesman declined to comment.S&P will
    meet with management before deciding whether to lower its rating of BBB
    on Lexmark’s senior unsecured debt. Standard & Poor’s rates
    borrowers from a low of D to as high as AAA. Lower ratings can mean
    paying higher interest rates on debt.Lexmark’s rating of BBB is the
    last rating above non-investment grade, commonly called junk bond
    status, though it could be downgraded to BBB- before falling to junk
    bond status.If downgraded, Schrank said he expects the company’s rating
    would fall no worse than one notch.

    “This is the only
    possible path for our company,” acting Chief Executive James A. Marcum
    said in a statement. “We are extremely disappointed by this
    outcome.”Late last year, the company announced it would close 20
    percent of its stores, including its location on Nicholasville Road in
    Lexington. But now its remaining 567 U.S. stores, including its second
    Lexington location at Hamburg Pavilion, will begin store-closing sales.
    The chain has about 34,000 employees.The news surprised longtime
    Lexington patron Fred Hill as he left the store on Friday
    afternoon.Over the years, he’s purchased three laptop computers, two
    high-definition televisions and countless other products.”I always
    enjoyed a great rapport with the people,” he said.

    Hudson Capital Partners said closing sales, which could begin as early
    as Saturday, will start with discounts up to 30 percent.It’s still
    unclear what will happen to Circuit City’s 765 retail stores and dealer
    outlets in Canada, as there are still bids for the Canadian
    business.And while analysts said the loss of Circuit City will be a big
    blow to malls and other shopping centers, it will also prove a blow to
    Lexmark and its struggling inkjet printer division.Seven different
    Lexmark printer models, including a few exclusive to Circuit City, were
    on the shelves at Lexington’s location on Friday afternoon. The store
    also had three more closeout models. Lexmark’s presence was greater
    than all other printer manufacturers except for leader HP.

    Lexmark spokesman declined to comment on Circuit City’s closing, as the
    company is in a quiet period prior to its fourth-quarter earnings
    announcement later this month. The company revised that earnings
    forecast earlier this week, saying it would be lower than expected
    because of weaker demand for printers given the economy, as well as
    other factors.Included in that announcement was that the number of
    inkjet printers sold during the quarter dropped 43 percent compared to
    a year earlier.Lexmark will now have one less electronics store to rely
    on for distribution. Circuit City rival Best Buy dropped the company’s
    printers from its stores last year, opting to sell them only on

    A search of on Friday showed only one
    printer that may be available in stores, and that model is not at any

    store in Kentucky.Tom Carpenter, vice president and senior equity
    analyst at Hilliard Lyons in Louisville, said this week that Lexmark’s
    “continued significant decline in inkjet unit sales brings the question
    again of the viability of the inkjet division. If they don’t get more
    shelf space this year, I think the writing’s on the wall.”And in
    another blow, Lexmark could end up out some money to Circuit City. The
    company was among Circuit City’s top 50 creditors, according to its
    bankruptcy filing, and was owed nearly $3 million.