Circuit City laid off 3,400 of its highest-paid sales associates last month...The No. 2 CE chain said it plans to replace the employees, who were paid “well above the market-based salary range for their roles,” with new hires who will be compensated at the current market range for those jobs.
A more recent report from TWICE, from Tuesday of this week:
Best Buy reported improved margins in home theater and stronger computer sales during its fiscal second quarter, which generated double-digit gains in net earnings and revenue.
The chain reported net earnings of $250 million in its fiscal second quarter, a gain of 17 percent, and a 15 percent revenue gain to $8.8 billion during the quarter vs. the previous year.
Circuit City executives told analysts today that second quarter sales and earnings shortfalls were attributable to massive structural and procedural changes that disrupted operations during the first half.
Net sales at the No. 2 CE chain slipped 6.2 percent to $2.6 billion for the three-month period, ended Aug. 31, while same-store sales fell nearly 8 percent against strong year-ago comparisons. Net loss for the quarter was $63 million and its gross profit margin fell 313 basis points.
The chain attributed the latter to a decrease in merchandise margins stemming from a 38 percent drop in extended warranty sales and a greater mix of PC hardware revenue amid margin declines in computers and TVs.
The mass layoff of Circuit City sales associates in March was not
without precedent, as the company did largely the same thing during
trying times for the business back in 2003. The fact that Circuit City
management returned to the 2003 tactics so soon, demonstrated an
intense lack of imagination as well as a failure to anticipate knock-on
effects, such as the challenge of attracting new replacement-level
cannon fodder and getting them productive.
The really ironic thing about the justification for the layoffs is
that according to news reports the "well above market-based salary"
difference amounted to only 50 cents an hour, which means total
bottom-line benefit from the layoffs was less than $4 million.
It's hard to see how savings of $4 million could offset the
collective loss of experience of more than 3,000 employees who, after
all, are directly responsible for converting tire-kicking prospects
into paying customers. While it's relatively easy -- even fashionable
-- to denigrate the competence and product knowledge of the typical big
box store salesman, Circuit City has obviously suffered in losing some
of its most experienced sales staff by its own hand. You really need to
look no further than the dramatic decline in extended warranty sales --
those plans obviously don't sell themselves.
While it's certainly possible that Circuit City is poised for a
dramatic turnaround in upcoming quarters, even if that does happen, it's extremely difficult to see the company quickly recovering the ground lost during the second quarter. More likely, Circuit City and its management team are well
on the way to being immortalized in one of those "Don't Try This With
Your Company" Harvard Business Review case studies.
Video Savant 
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