Circle K Corp. has begun closing 201 stores, including four in Utah, targeted as unprofitable and will complete the job by the end of the month, company spokesman Ray Cox says.
More closings are possible after the effects of the step are analyzed, he said.Scheduled for closing are a store in Roy, stores at 3290 W. 1300 East and 3300 S. 700 East, both in Salt Lake City, and one at 9000 S. 1300 West, West Jordan. He said the employees will be absorbed into other Circle K stores.
Cox said the stores are located in 21 states. All are on leased land.
Texas has the greatest number - 43 - followed by California with 29, Georgia with 23, and Florida with 20.
Arizona ranked seventh, with eight stores to be closed. Five are in Phoenix, two in Tucson and one in Mesa, Cox said.
He would not say how much it was costing Circle K to terminate the leases or how much the company expects to save. Cox said most of the 201 stores have been closed.
No layoffs will take place as a result of the closings, Cox said. An estimated 1,600 workers will be offered jobs elsewhere within the system.
"There's always a need for people at the store level," he said.
Analysts said they doubted that 200 closings would suffice to pull the company from the protection of U.S. Bankruptcy Court, where it filed for Chapter 11 protection from creditors May 15.
Under the U.S. Bankruptcy Code, the chain is permitted to reject leases that don't meet a variety of criteria, Cox said.
Store closings mainly were determined by gross sales and profitability figures, Cox said. But other factors, including traffic counts and neighborhood deterioration, also were taken into account, he said.
"They're probably closing all the leases they can get out of easily," said Dennis Telzrow, an analyst with Eppler, Guerin & Turner in Dallas. He said he was surprised Circle K planned to close only eight stores in Arizona, where it has more than 350.
Cox responded that the Arizona stores were profitable, and analysts said the Phoenix-based company may have better controls and more efficient distribution capabilities at home.
"Anybody who steps into a situation looks to where they can cut the quickest with the most savings and the least damage to the company overall. At least it's a good, strong first step," said Nicholas Meris, Scottsdale office manager of Prudential-Bache Securities Inc.
Circle K's latest move follows the recent termination of 400 leases on stores that had been shut down. Those leases were estimated to cost the company $1 million to $1.5 million per month.
The company also had deals to sell 375 stores in Hawaii and the Pacific Northwest prior to its Chapter 11 filing. The deals have been delayed pending court approval.
Circle K operates about 4,500 convenience stores in 32 states and has an additional 1,300 licensed or joint-venture stores in 14 foreign countries.