Circuit City announced Wednesday that it will terminate approximately 3,400 store associates “who were paid well above the market-based salary range for their role.”
In their place, the company has announced its plans to re-fill these positions with workers who are “compensated at the current market range for the job.”
Its plans to hire lower-paid employees to replace the retail associates are simply one part of previously disclosed cost-cutting measures to improve sales and cut expenses.
The Richmond, Virginia-based consumer electronics retailer also announced that it has entered into an agreement with IBM to outsource its information technology infrastructure operations.
Under the seven-year, $775 million agreement, IBM will manage Circuit City‘s data center operations, store support services, e-commerce hosting operations, service desk operations and network, as well as provide desktop support, business systems management, and IT security services.
The company says the arrangement is expected to reduce planned IT expenses by more than 16%.
With this change, the company will slash another 130 Circuit City corporate associates.
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However, the company says approximately 50 will transition to jobs with IBM and remain on-site serving the Circuit City contract. The remaining 80 will be let go.
“We are taking a number of aggressive actions to improve our cost and expense structure, which will better position us for improved and sustainable returns in today’s marketplace,” chief executive Philip J. Schoonover said in a statement.
He added that, “Unfortunately, a number of associates are directly impacted by the actions, but we are making Circuit City stronger for the long term.”
There are no immediate plans to close U.S.-based stores. In Canada, Circuit City has already closed about 55 stores, with plans to close about 10 more stores through next year.
Circuit City trails Best Buy as the nation’s leading consumer electronics retailer.