CIRCUT CITY 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.

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January 19, 2009 at 11:42 AM