NEW YORK (MarketWatch) -- Circuit City Stores Inc., suffering from declining sales, traffic and cash, said Monday that it's shutting 155 U.S. underperforming stores in a last-ditch efforts to stay afloat before what some analysts predict may be an unavoidable bankruptcy.

Despite its efforts to reach out to its top vendors, remove its chief executive and explore a sale of the company earlier this year, Circuit City's latest move -- after the financial meltdown that further exacerbated the declining U.S. economy and consumer confidence -- may not be enough to reverse sinking traffic and sales, analysts said.

Circuit City had been hurt by having stores in less-favorable locations than those of Best Buy Co.; by increased competition from the likes of Wal-Mart Stores Inc.; and by an earlier move to lay off higher-paid staff who were able to push more profitable sales, according to industry observers.

Cash and short-term investments declined 78% to $92.5 million in the company's most recently reported quarter, while short-term debt was $215 million.

"We believe that a bankruptcy filing is largely unavoidable," said Bernstein & Co. analyst Colin McGranahan. "We expect the remaining stores to be under continued pressures."

In addition to store closings, Circuit City said that it's reducing future store openings and renegotiating leases to help preserve cash after its liquidity deteriorated and vendors tightened payment terms for the electronics retailer.

The closings will result in a reduction of about 7,300, or about 17% in the company's U.S. workforce, Richmond, Va.-based Circuit City CC, -0.63% said.

As a result of the closings, Circuit City's exiting U.S. 12 markets, and management's considering all available options and alternatives to restructure the business. See MarketWatch First Take commentary.

The company also halted the opening of at least 10 locations that it had planned for this year, while suspending openings completely next year and asking landlords for lower rents on some of its leases.

"This decision was rational and necessary to attempt to conserve capital, but we are concerned recent actions taken by some vendors (such as setting more restrictive payment terms and limiting credit) will ultimately prove too challenging for [Circuit City] to overcome," Standard & Poor's analyst Michael Souers wrote in a note.

As of Oct. 31, Circuit City had 712 stores and nine outlets in the U.S. Its international segment operated through 770 retail stores and dealer outlets in Canada as of Sept. 30. The closed stores are located in states from New York to Texas.

Analysts estimate the number of store closings represent about 12% to 13% of Circuit City's domestic sales.

Beaten down 92%

Circuit City shares jumped 36% to 35 cents a share in late-afternoon trading. They've still lost 92% of their value this year amid Wall Street concerns the company's declining operating results and liquidity may lead it to go under and eventually file for Chapter 11 protection.

Also higher were shares of larger rival Best Buy BBY, +1.51% , on expectations that it will pick up additional market share as a result of Circuit City's store closings. Wal-Mart WMT, -0.08% , which is expanding its electronics business, will benefit as well, analysts said.

Declining consumer confidence and a significantly weakened retail environment have hurt Circuit City's sales and gross profit-margin rate more than it had anticipated, the company indicated.

Some of Circuit City's vendors, which also are facing tightened credit terms from their lenders, are asking for payment before they ship products and have limited the credit available for purchases -- including not giving the company the customary increases in credit line for holiday purchases.

That tightening in terms and credit availability is becoming "unmanageable," Circuit City said.

Circuit City also hasn't been able to collect an income-tax refund of about $80 million that it said it's owed from the federal government.

"Since late September, unprecedented events have occurred in the financial and consumer markets causing macroeconomic trends to worsen sharply," said James Marcum, acting president and chief executive of Circuit City. "The weakened environment has resulted in a slowdown of consumer spending, further impacting our business as well as the business of our vendors. The combination of these trends has strained severely our working capital and liquidity."