Updated 10/2 at 7:15 a.m. with comment from Circuit City.

Two analysts said Circuit City may file for bankruptcy, according to two Wednesday stories by Reuters and Bloomberg.

It’s unknown what type of bankruptcy Circuit City , the nation’s second largest electronics retailer, may file. Linens ‘n Things, Mervyn’s and Barbeques Galore USA filed for Chapter 11 bankruptcy protection.

In Orange County, Circuit City has 12 stores.

Here’s an excerpt from the Reuters story: 

“The risks of bankruptcy are very real, in our opinion,” Stifel Nicolaus analyst David Schick wrote.

Last week, Deutsche Bank’s Michael Baker said in a note to clients that without a strong holiday season, Circuit City “significantly increases bankruptcy risk.”

In an e-mailed statement, Circuit City spokesman Bill Cimino, said: “While others may speculate, we’ve commented directly on our liquidity position now and through the holidays.  We have adequate liquidity given our $1.3 billion asset-backed credit facility given current vendor terms.  I would also note that our lenders, in addition to our vendors, continue to support the company’s turnaround efforts.”  

Earlier this week, Circuit City reported that sales at stores open at least a year fell 13.3 percent in the fiscal second quarter ended Aug. 31.

Sales dropped for several reasons, the company said, including a worsened macroeconomic environment, competitive pressures and a weakened brand position.

During a conference call this week with analysts, acting CEO James Marcum said Circuit City expects to dramatically reduce its store openings beginning next year. Other than fulfilling exisitng commitments, which are limited, it would not expect to open new stores in fiscal 2010 so it can focus on improving its exisitng stores.

An analyst later asked if there’s potential for significant store closures since the company is cutting back on store openings.

Chief financial officer Bruce Besanko said that “in the past, we periodically closed stores either because of performance or because of the brand or for other business reasons. We’re likely to do so again in the future … we’re undertaking a comprehensive review of the business in order to identify and execute against ways to dramatically improve the overall financial position of the company … as part of that review … all options will be on the table.”

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For more from OC Retail, see list of links on right-hand side of this blog.

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