Circuit City files for chapter 11

Well, that didn't take long. Exactly a week after announcing mass store closings last Monday, Circuit City has filed for bankruptcy protection, according to a report by Reuters.

Circuit City CFO Bruce Besanko said of the move, "In large part, a Chapter 11 filing is due to three factors, all of which contributed to a liquidity crisis that prevented the company from completing its turnaround goals outside of formal proceedings: erosion of vendor confidence, decreased liquidity and a global economic crisis." Circuit City complained last week that some of its suppliers were now asking to be paid in advance before shipping goods. Reuters also notes that the company has lost money in "five of the last six quarters"—the latest loss amounting to $239 million.

What now? Circuit City will continue to run during the bankruptcy proceedings, Reuters reports, and Best Buy could take over some of the 155 stores that close. Interestingly, an analyst for Jefferies & Co believes a "flood of discounted merchandise" from Circuit City's closing stores could take holiday season sales away from Best Buy.

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