Circuit City Stores Inc., the bankrupt consumer-electronics chain, starts going-out-of- business sales at its 567 U.S. stores today, the beginning of the end for a retailer that began selling televisions in 1949.

Revenue declines that started when Best Buy Co. and Wal- Mart Stores Inc. began offering TVs and computers at lower prices deepened as the U.S. entered a recession and vendors demanded that Circuit City pay up front for their goods. On Nov. 10, the Richmond, Virginia-based chain filed for bankruptcy protection after suppliers cut off credit.
At the time, Circuit City, which employs more than 30,000 people in the U.S., planned to continue operations after exiting Chapter 11. Negotiations with prospective buyers failed, and the company said it had agreed to hand its U.S. merchandise to a group of liquidators.
“You hate to see stores go out of business,” said Tom Kinley, 51, a social worker who was shopping for a surge protector in a Chicago Circuit City. “It feels a little scary. It just feels like things are slipping away.”
Great American Group WF LLC; Hudson Capital Partners LLC; SB Capital Group LLC; and Tiger Capital Group LLC won the liquidation rights in a court-sanctioned auction. Circuit City estimated the value of its inventory at $1.2 billion to $1.3 billion, and creditors are guaranteed 70.5 percent. Stockholders will probably get nothing, Circuit City said in a statement.
Best Buy, the biggest U.S. consumer-electronics retailer, and regional chains such as Hhgregg Inc. of Indianapolis and Beaumont, Texas-based Conn’s Inc. stand to benefit most from Circuit City’s departure, according to Scott Tilghman of Hudson Square Research.
Regional chains may gain “disproportionate market share relative to their sizes,” the Elkridge, Maryland-based analyst said in a note to clients.
Richfield, Minnesota-based Best Buy jumped $2.39, or 8.8 percent, to $29.53 in New York Stock Exchange composite trading. Hhgregg rose 5.7 percent; Conn’s gained 11 percent.
Next to the Best Buy on Fifth Avenue in New York, shoppers entered a Circuit City branch throughout the day to inquire about the liquidation, store manager Jeff Struble said.
“They just come in and ask ‘When do the sales start?’” said Struble, 44. “I tell them, ‘I don’t know, we just found out this morning.’ And then they walk out.”
The liquidation agreement, approved by U.S. Bankruptcy Judge Kevin R. Huennekens, came a day after the company held another auction described in court papers as its last chance to survive bankruptcy as a smaller chain.
“Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders,” James A. Marcum, acting chief executive officer, said in the statement.
Circuit City tried to strike a deal with Ricardo Salinas Pliego, Mexico’s fourth-richest man, or with Golden Gate Capital Corp., a San Francisco-based private-equity firm, company attorney Gregg Galardi told Huennekens at a hearing in Richmond.
Neither could get financial support from lenders, who wanted suppliers to provide merchandise on credit, the lawyer said. With more time, Circuit City could have sold a smaller package of stores and emerged from bankruptcy protection as a reorganized company, Galardi said.
Founded in 1949 by Samuel Wurtzel, Circuit City opened Richmond’s first retail TV store.
At a store in Wheaton, Maryland, workers were told to remove gift cards. Manager John Armstrong said liquidators would be in his location Friday and Saturday to review inventory. Employees learned about the shutdown via e-mail, he said.
Management tried to sell the company in May after movie- rental chain Blockbuster Inc. made a preliminary offer, only to withdraw it a few months later. The retailer hired FTI Consulting Inc. for restructuring advice and replaced CEO Philip Schoonover in September with Marcum, who has led two other retailers through bankruptcy.
The case is In Re Circuit City Stores Inc., 08-35653, U.S. Bankruptcy Court, Eastern District of Virginia (Richmond).