CIRCUT CITY's CLOSURE A BLOW TO LEXMARK CORP

[Anonymous]

http://www.kentucky.com/101/story/661601.html
Circuit City closure a blow to Lexmark
Circuit
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
A
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.

Liquidator
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.

A
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
BestBuy.com.

A search of BestBuy.com 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.

[Author]

January 19, 2009 at 11:43 AM