The US’s second largest electricals retailer has sent shockwaves through the global IT channel by filing for Chapter 11.

Circuit City filed for bankruptcy protection yesterday after admitting its suppliers had effectively refused to give it stock for the upcoming holiday season.

The giant intends to close 155 of its 700 stores, leading to a 17 per cent reduction in its 40,000-strong workforce over the next two months. An additional 1,300 jobs will be slashed.

UK sources claim the episode could have a huge knock-on impact on the channel as credit insurers review their exposure to the sector.

It is believed that some of the retailer’s largest creditors, which include the likes of HP, Samsung, Sony, Zenith and Toshiba, were fully insured.

Circuit City is the largest US retailer to go under since the credit crunch began.

The firm has recently lost market share to larger rival Best Buy and chief financial officer Bruce Besanko said that a decline in credit card spending and a loss in vendor confidence were also big factors in the firm’s demise.

“Without immediate relief, the company is concerned that it will not receive goods for Black Friday and the upcoming holiday season,” he said.