Circuit City Stores Reports Q2 Sales and Earnings Expectations
RICHMOND, Va.--Sept. 7, 2001--Circuit City Stores, Inc. today reported sales and earnings expectations for the second quarter ended August 31, 2001, for the company, the Circuit City Group and the CarMax Group .Circuit City Stores, Inc. Sales
For the second quarter ended August 31, 2001, total sales for Circuit City Stores, Inc. declined 9 percent to $2.89 billion from $3.18 billion in the second quarter of last fiscal year.
Circuit City Group Review
For the second quarter ended August 31, 2001, total sales for the Circuit City Group declined 19 percent to $2.04 billion from $2.51 billion in last year's second quarter. Comparable store sales declined 21 percent. Excluding the major appliance category, from which the company completed its exit during the third quarter of last fiscal year, comparable store sales declined 9 percent.
"Similar to the first quarter, comparable store sales were affected by the absence of the appliance business, which represented 14 percent of merchandise sales in last year's second quarter; continued industry-wide weakness in personal computer sales; and general softness in other categories," said Alan McCollough, Circuit City's president and chief executive officer. "Within the broader categories, however, we experienced considerable strength in more advanced technologies, such as digital televisions, and in the new and expanded categories, such as digital imaging, video games and personal computer software, accessories and peripherals, which were added in the former appliance space."
The percent of merchandise sales represented by each major product category during the second quarter and the first six months was as follows:
Percent Merchandise Sales by Category
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Second Quarter Ended Six Months Ended
August 31 August 31
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2001 2000 2001 2000
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Video 38% 32% 38% 32%
Audio 16 15 16 15
Information Technology 36 34 36 34
Entertainment 10 5 10 5
Appliances -- 14 -- 14
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Total 100% 100% 100% 100%
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In July, Circuit City launched a new marketing campaign. The campaign, which includes new print, television and radio advertising, focuses on Circuit City's "customer-first" attitude. It includes an energetic new logo and the empathic tag line, "We're with you."
During the second quarter, Circuit City commenced its current year store remodeling tests. The company is testing two different remodel formats: a more extensive approach is being conducted in 10 stores in the Chicago market and two stores in Virginia, and a second, less costly version is being tested in 12 stores in the Washington, D.C., and Baltimore, Md., markets. The majority of the remodeling was completed during the second quarter and will impact the second quarter expense ratio.
During the current quarter, Circuit City opened four new stores, in Boca Raton, Fla.; Dallas, Texas; St. Louis, Mo.; and Tampa, Fla., and relocated two stores, in Louisville, Ky., and Tampa, Fla.
"We estimate that the first and second quarter sales and operating trends will result in a first half loss for the Circuit City business that is at the better end of the 11 cent to 16 cent per Circuit City Group share range anticipated at the outset of the year," said McCollough. "Although the first half results have been relatively consistent with our expectations, we remain conservative in our outlook for the second half given the uncertain economic and industry climate. We are optimistic, but cautious, that the introduction of Windows XP and new gaming platforms, continued consumer interest in digital technology and our own focus on delivering the best possible customer service will strengthen our sales growth during the latter half."
Earnings for the Circuit City Group also include a retained interest in the CarMax Group. CarMax has exceeded sales and earnings expectations throughout the year and raised expectations in early August. Based on the August increase and the impact of the second quarter CarMax stock offering, the company estimates that the CarMax Group will contribute approximately 18 cents to 19 cents per share to the Circuit City Group's first half results.
CarMax Group Review
Total sales for the CarMax Group rose 27 percent for the quarter ended August 31, 2001, to $851.8 million from $673.6 million in the same period last year. Comparable store sales also rose 27 percent.
"Our August sales continued the same robust growth that we saw during the first two months of the quarter and that led to the increased earnings expectations we announced on August 1," said W. Austin Ligon, president of CarMax. "Our comparable store sales growth of 27 percent was achieved on top of an 18 percent comparable store sales increase in last year's second quarter and resulted from strong store traffic, a continuing improvement in sales execution and a moderate increase in average retail prices. In addition, the Houston market produced particularly strong comparable store sales, partially as a result of vehicle replacements in the wake of flooding caused by tropical storm Allison. We estimate that the increased sales in our Houston stores caused by vehicle replacements related to the flood added roughly 2 percentage points to the total comparable sales for the quarter.
"We were particularly pleased that our sales continued to perform strongly despite the recent industry reports of new-car sales declines and an overall decline in consumer confidence. We believe this performance reflects both the strength of the CarMax consumer offer and the effectiveness of our marketing programs, particularly CarMax.com," Ligon said. On August 1, CarMax raised earnings expectations for the second quarter to a range of 24 cents to 25 cents per CarMax Group share.
The percent of vehicle sales represented by each category for the second quarter and the six months was as follows:
Percent Vehicle Sales by Category
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Second Quarter Ended Six Months Ended
August 31 August 31
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2001 2000 2001 2000
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Vehicle Dollars:
Used Vehicles 81% 79% 81% 80%
New Vehicles 19% 21% 19% 20%
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Total 100% 100% 100% 100%
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Vehicle Units:
Used Vehicles 87% 86% 87% 86%
New Vehicles 13% 14% 13% 14%
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Total 100% 100% 100% 100%
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Earnings Release Date
Circuit City expects to release earnings for the company, the Circuit City Group and the CarMax Group on September 19, 2001.
Conference Call Information
Circuit City will host a conference call for investors at 10:00 a.m. Eastern Time today to discuss this morning's announcement. Domestic investors may access the call at 1-888-769-8791 (passcode: Circuit City). International investors should dial 1-212-547-0180 (passcode: Circuit City).
A replay of the call will be available beginning at approximately 12:00 noon Eastern Time today and will run through midnight, September 11. Domestic investors may access the recording at 1-888-568-0499 and international investors at 1-402-530-7989. No access code is required. A replay of the call also will be available on the Circuit City Group's investor information home page http://investor.CircuitCity.com, the CarMax Group's investor information home page http://investor.CarMax.com and at http://www.streetevents.com.
Circuit City is a leading national retailer of brand-name consumer electronics, personal computers and entertainment software. CarMax is the nation's leading specialty retailer of used cars. With headquarters in Richmond, Va., Circuit City Stores, Inc. operates 598 Circuit City Superstores and 29 mall-based Circuit City Express stores, giving it more locations in more markets than any other consumer electronics specialty retailer. The company operates 40 CarMax retail units in 37 locations, including 33 used-car superstores. CarMax operates 20 new-car franchises, most of which are integrated or co-located with its used-car superstores. For more information, access the company's Web sites at CircuitCity.com and CarMax.com.