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Analysts: Circuit City Layoffs Could Backfire

  • MSNBC/AP, Thursday, March 29, 2007 11 AM
Facing larger competitors and falling sales, Circuit City announced yesterday that it was laying off about 3,400 store workers--about 8% of the company's total work force--and replacing them with lower-paid new hires as soon as possible. The laid-off workers, who will receive a severance package, will have a chance to reapply for their former jobs, at lower pay, after a 10-week delay.

Analysts and economists say the move is an uncertain experiment that could backfire for the chain. Morale could sink, and customers could avoid the stores. Also, knowledgeable customer service is one of the few ways Circuit City can tackle competitors that include Wal-Mart Stores Inc.

The nation's No. 2 consumer electronics retailer behind Best Buy says the workers being laid off were earning "well above the market-based salary range for their role." But it declined to reveal how much those laid off were paid, and how much the new workers would make, saying it depends on the market.



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