Circuit City Stores, Inc. Reports Second Quarter Sales
7 September 2000
Circuit City Stores, Inc. Reports Second Quarter Sales, Earnings Expectations for the Circuit City Group and the CarMax Group
RICHMOND, Va., Sept. 7 Circuit City Stores, Inc. today
reported sales for the second quarter ended August 31, 2000, for the company,
the Circuit City Group and the CarMax Group and
adjusted second quarter earnings expectations for both businesses, including
an increase in expectations for CarMax.
SECOND QUARTER SALES
Circuit City Stores, Inc.: For the quarter, total sales for Circuit City
Stores, Inc. rose 7 percent to $3.18 billion from $2.96 billion in the second
quarter of last year.
Circuit City Group: Total sales for the Circuit City Group rose 4 percent
for the quarter to $2.51 billion from $2.42 billion in last year's second
quarter. Comparable store sales were unchanged.
During the first fiscal quarter, Circuit City removed the major appliance
category from 30 stores in central and south Florida in advance of a full
remodel of those stores to focus solely on the consumer electronics and home
office categories. Those remodels will be complete before the holiday selling
season. Excluding the stores in these markets, comparable store sales rose 1
percent in the second quarter.
In late July, Circuit City announced plans to exit the major appliance
category in all stores and begin partial remodels that will expand the
selection of peripherals, accessories, software, digital imaging and video
games prior to the holidays. This decision reflected management's sales and
earnings expectations for its new store design, significant weakness in
comparable store sales of major appliances and increased competition in that
category. Excluding the appliance category, comparable store sales rose
6 percent in the quarter ended August 31, 2000.
CarMax Group: For the CarMax Group, total sales for the quarter ended
August 31, 2000, rose 26 percent to $673.6 million from $535.7 million in the
same period last year. Comparable store sales rose 18 percent.
CIRCUIT CITY GROUP REVIEW
"Throughout the quarter, sales growth for the Circuit City business was
led by the home office category, especially digital imaging technology; video
products such as DVD and big-screen televisions; wireless communications,
particularly digital; and strong accessory sales, on which we have placed an
increased emphasis," said W. Alan McCollough, president and chief executive
officer of Circuit City Stores, Inc. "Reflecting continued monthly variations
in comparable store sales performance, sales across the home office and
consumer electronics categories were stronger during the first two months of
the quarter and softened in the final month.
"Comparable store sales in the major appliance category declined 23
percent for the quarter," said McCollough. "Merchandise markdowns in the
appliance category began in the first group of stores in late July and August,
and the appliance sales decline lessened considerably as clearance sales
progressed. Fifty-four stores had completed the exit from the appliance
business and interim remodeling in time for Labor Day weekend sales. We
expect to complete one flight of stores per week between now and November 6.
"In mid-August, we soft opened the first new store to reflect our new
design, including a more contemporary look, expanded merchandise selections
and more flexible ways for the consumer to shop," said McCollough. "This
store, in Jacksonville, Fla., began grand opening advertising and other
promotions over the Labor Day weekend. A second store is scheduled to open
later this month in Albany, N.Y."
The percent of Circuit City's merchandise sales represented by each major
product category during the second quarter and the first six months of the
fiscal year is as follows:
Three Months Ended Six Months Ended
August 31, August 31,
2000 1999 2000 1999
Television 17% 17% 17% 18%
VCR/Camcorders 12% 12% 12% 12%
Audio 15% 14% 15% 15%
Home Office 31% 28% 31% 27%
Appliance 14% 18% 14% 17%
Other 11% 11% 11% 11%
TOTAL 100% 100% 100% 100%
"We initiated our major appliance clearance sales in some stores in
multi-store markets earlier than anticipated and increased our markdowns in
response to intensified competitive promotions which followed our announcement
that we would exit the category," said McCollough. "As a result, we expect
second quarter earnings per share for the Circuit City business of
approximately 21 cents, which is 2 cents lower than our July forecast. This
number includes 2 cents per share of unanticipated appliance merchandise
markdowns and the previously anticipated 9 cents per share of one-time costs
attributed to exiting the appliance business. The one-time costs relate to
lease terminations, employee severance, fixed asset impairment and other
related costs. Excluding these costs, we anticipate earnings per share for
the Circuit City business of approximately 32 cents. We have not revised our
earnings estimates for the third and fourth quarters."
Earnings for the Circuit City Group also include a retained interest in
the CarMax Group. The company expects the CarMax Group to contribute
approximately 6 cents per share to the Circuit City Group's second quarter
earnings, resulting in earnings per Circuit City Group share of approximately
27 cents in this year's second quarter compared with 36 cents in the same
period last year.
CARMAX GROUP REVIEW
"We continue to produce strong comparable store sales growth, especially
in used vehicles," said W. Austin Ligon, president of CarMax. "The more
profitable used-car sales remain ahead of our expectations, resulting in an
upward revision in our earnings expectation for the quarter. We believe our
performance reflects our focus on the improved execution of our consumer offer
throughout the past year and increased customer traffic driven in part by
rapid growth in the number of consumers using our Web site, http://www.carmax.com."
The percent of vehicle sales represented by each category for the second
quarter and the six months is as follows:
Three Months Ended Six Months Ended
August 31, August 31,
2000 1999 2000 1999
Vehicle Dollars:
Used Vehicles 79% 78% 80% 80%
New Vehicles 21% 22% 20% 20%
Vehicle Units:
Used Vehicles 86% 85% 86% 87%
New Vehicles 14% 15% 14% 13%
"We increased our earnings expectation to a range of 11 cents to 13 cents
per CarMax Group share following the first two months of the quarter; but
adding the strong August performance, we now anticipate earnings per CarMax
Group share of approximately 15 cents for the quarter ended August 31, 2000,"
said Ligon.
During the quarter, CarMax added a Suzuki franchise to its Garland, Texas,
superstore in the Dallas/Ft. Worth market and a Mitsubishi franchise to its
superstore in Nashville, Tenn. CarMax operates 22 new-car franchises, most of
which are co-located with used-car Superstores.
Circuit City expects to release earnings for the company, the Circuit City
Group and the CarMax Group on September 18, 2000.