Circuit City shoppers, here are some tips

Nov 12, 2008 (The Sacramento Bee - McClatchy-Tribune Information Services via COMTEX) -- CC | Quote | Chart | News | PowerRating -- Circuit City Stores Inc.'s Monday bankruptcy announcement caught Carl Calnero's attention, and not just because he's a business attorney with the Sacramento-based Porter Scott law firm.

Calnero recently purchased a TV and a three-year warranty for it from Circuit City. Like many people, he wondered what the company's Chapter 11 debt reorganization plan would mean to customers before and after the filing.

And if the company doesn't survive, what then?

He did some quick research and on Tuesday told The Bee what he found. Calnero also drew on his 25 years of experience as a business litigator to discuss Circuit City's future and the wave of bankruptcies that has washed over the retail industry.

We also spoke with Greg Daugherty, executive editor of Consumer Reports magazine, to get his take on what Circuit City's bankruptcy filing means for shoppers.

What attitude should consumers have about buying at Circuit City?

Calnero: Well, I'd be a little worried about gift cards. I wouldn't buy them over the next 60 days or so until we see how this shakes out.

Daugherty: It's better not to take the risk of buying a gift card from a retailer whose future is iffy. And if you have one, get to the store and use it.

What about buying TVs or other big-ticket items and their warranties? How confident should a consumer be that Circuit City warranties will remain in force?

Calnero: The company's warranty program is run by a third-party guarantor that isn't part of the bankruptcy filing. In this case, the program is run by Circuit City Advantage Protection Plan. It's a separate entity.

For something big, like large-screen TVs, they come to your home. If they can't repair it, they'll give you a new one. It's happened to me. It's a commendable warranty program.

Daugherty: With manufacturers' warranties, which is what covers most items right after they're purchased, those are between the customer and the manufacturer.

We don't think people should buy extended warranties at Circuit City or anyplace else. They're a waste of money.

What about smaller items?

Calnero: You have to bring smaller electronics to the store. As long as they stay in Chapter 11 (debt reorganization), that's fine. But if they don't make it out of Chapter 11, then it might be more cumbersome to get a smaller item repaired.

Why?

Calnero: If the stores close, they'll have to send out lists of new service providers to Circuit City customers. Those providers may be farther away.

But ultimately the warranties will be honored because the warranty company owns that obligation. But it might not be as convenient for customers to get some things fixed.

Daugherty: If you have something you want to return to Circuit City, get it in there soon. You don't know the future of the company.

Several retailers have tried to reorganize and failed. Mervyns and Linens 'n Things started in Chapter 11 and then went into Chapter 7 (asset liquidation) to pay creditors. Is that common? Will Circuit City follow that trend?

Calnero: These bankruptcies are going to unfold case by case. You can't compare clothing retailers and electronics retailers. They're not the same. The difference for them compared with some other retailers is their high-ticket sales are really impacted by the credit crunch.

So what does your experience tell you about Circuit City's future? It's closing about 150 of its nearly 700 U.S. stores and chopping 17 percent of its work force. It plans to emerge from bankruptcy next year. Will it?

Calnero: With the plan that they've announced, the real question will be, can they stay competitive? Circuit City may survive by becoming smaller and focusing on its strongest markets. It may not.

The bigger question is where the economy is headed. And that's anybody's guess.

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Call The Bee's Jon Ortiz,(916) 321-1043.

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