Source: Bloomberg
Circuit City Stores Inc., the second-largest U.S. electronics retailer, will fire 3400 of its highest-paid sales people and hire replacements willing to work for less. Those who were fired can apply for the lower-paying jobs, company spokesman Bill Cimino said today. Sales may be volatile during the first half of this year as the new sales people transition in, the company said today in a statement.

“Firing 3400 of arguably the most successful sales people in the company could prove terrible for morale,” Colin McGranahan, an analyst with Sanford Bernstein & Co., wrote in a note today. “The question remains as to whether Circuit City can rebuild in time for the all-important holiday season.” The company also will eliminate another 130 jobs after hiring IBM to manage some of its computer operations. About 50 Circuit City workers will transfer to IBM. The sales people being fired weren’t given an option of taking a pay cut, spokesman Cimino said. He declined to give the pay rate for fired workers or the expected wages for new hires.

The job cuts will be “a challenge for Circuit City,” said Rick Weinhart, an analyst with BMO Capital Markets Corp. in New York. “These are all fresh faces coming in and certainly they’re less experienced, so I’m guessing it’s not going to be a one- or two-quarter challenge. There’s going to be a learning curve.” Circuit City pays about $10 to $11 an hour, on average, Weinhart estimated. Entry level pay probably is close to $8 for inexperienced workers, he said.