Nov. 3 (Bloomberg) -- Circuit City Stores Inc., the unprofitable electronics retailer, will close a fifth of its 721 U.S. stores and renegotiate leases on some of the remaining locations to conserve cash.

Circuit City rose 38 percent in New York trading. The closures, mostly in California, Georgia, Illinois, Arizona and Ohio, will eliminate 17 percent of about 43,000 U.S. employees, Circuit City said today in a statement.

The company said it's considering ``all available options and alternatives.'' After years of losing customers to Best Buy Co. and Wal-Mart Stores Inc., Circuit City is finding itself short of cash as it enters the holiday season, its biggest sales generator. The global financial crisis is making harder for the chain to stock its shelves and for consumers to finance purchases.

``Not doing anything is not an option,'' Colin McGranahan, an analyst at Sanford C. Bernstein & Co., said in an interview. ``Their vendors are tightening terms and they can't get enough product to keep the stores open.''

The company has posted six straight quarters of falling sales. Circuit City hired FTI Consulting Inc. and replaced its chief executive officer in September with Director James Marcum who has led two retailers through bankruptcy.

Circuit City jumped 10 cents, or 38 percent, to 36 cents at 4:15 p.m. in New York Stock Exchange composite trading. They dropped 95 percent in the past 12 months while Best Buy declined 42 percent.

The stores being closed will start liquidation sales on Nov. 5. The company will shutter 155 locations in 55 metro areas and exit 12 of those markets altogether, including Atlanta, Phoenix and Kansas City, Kansas.

Closing Stores

Circuit City's actions may signal more store closings in the industry. RadioShack Corp., the third biggest electronics retailer behind Best Buy and Circuit City, has been shuttering 30 to 40 locations a quarter as it tries to revive profit.

``I expect more of it,'' Take-Two Interactive Software Inc. Chairman Strauss Zelnick, said in an interview. Best Buy and Circuit City sell the company's Grand Theft Auto IV video game.

Circuit City is closing stores that contributed $1.4 billion in revenue last year, an average of about $9 million per store. Average revenue per U.S. store last year was about $16 million. The retailer, founded in 1949, has struggled with older stores in less desirable locations.

`Unprecedented Events'

``Since late September, unprecedented events have occurred in the financial and consumer markets causing macroeconomic trends to worsen sharply,'' Marcum said in the statement. ``The weakened environment has resulted in a slowdown of consumer spending, further impacting our business as well as the business of our vendors.''

Marcum helped turn around bankrupt companies including Hollywood Entertainment Corp., a movie-rental chain, and Ultimate Electronics Inc., an electronics retailer.

Circuit City tried to sell itself in May after Blockbuster Inc. made a preliminary offer that was later withdrawn. It fired higher-paid workers and opened smaller stores to cut costs. Until the shift to smaller stores, Circuit City's strategy had been to sell in locations as large as 44,000 square feet.

In September, Circuit City withdrew its forecast for the fiscal year ending Feb. 28. Today it suspended plans for any store openings for fiscal 2010 beyond commitments already made and won't open at least 10 stores it planned to open this fiscal year. With today's announcement, the chain has about 1,300 stores, including about 770 in Canada.

To contact the reporter on this story: Mark Clothier in Atlanta at mclothier@bloomberg.net.

Last Updated: November 3, 2008 16:59 EST