Circuit City Stores Revises Earnings Expectations
20 October 2000
Circuit City Stores, Inc. Revises Earnings Expectations For The Circuit City Business
Announces Remodel and Expansion Plans for Fiscal Year 2002
RICHMOND, Va., Oct. 20 Circuit City Stores, Inc. today
revised earnings expectations for its Circuit City business, based on lower-
than-expected sales in the current quarter.
"Although we had anticipated modest sales disruption related to our exit
from the appliance business and the partial remodel of all stores, since the
end of September, sales have softened significantly in virtually all product
categories, including those not affected by the remodeling process," said W.
Alan McCollough, president and chief executive officer of Circuit City Stores,
Inc. "While new or more complex technologies such as digital televisions and
digital camcorders and cameras remain our strongest products, the slower sales
pace extends to most categories in the store.
"Throughout this fiscal year, we have seen significant variations in
monthly sales, making it difficult to accurately project earnings," said
McCollough. "Our initial expectations for the third and fourth quarters
assumed that comparable store sales growth in consumer electronics and home
office products not affected by remodeling would remain at the levels
experienced in early summer. However, if the sales pace we have seen over the
last four weeks continues, we would instead anticipate a third quarter
comparable store sales decline in the mid single-digit range and a loss from
our Circuit City business in the range of 5 cents to 10 cents per share."
This range includes the following estimated costs associated with store
remodeling and the exit from the appliance business:
Estimated EPS Impact
Full Remodels (0.05)
Partial Remodels (0.09)
Appliance Merchandise Markdowns (0.06)
Sales Disruption (0.03)
Excluding these costs, expected earnings per share for the Circuit City
store business would be 13 cents to 18 cents in this year's third quarter
compared with 27 cents in the same period last year.
"If the current sales trends continue through the fourth quarter, we would
expect our Circuit City business to earn approximately 79 cents per share in
that quarter, equal to last year's fourth quarter results," said McCollough.
For the full year, earnings per share would be $1.13 to $1.18. Excluding
second quarter and third quarter costs associated with remodels and the exit
from the appliance business, earnings generated by the Circuit City business
for the full fiscal year would be $1.50 to $1.55 this year compared with $1.60
last year.
The company's Circuit City business contributes to the earnings of the
Circuit City Group . The Group's earnings also include a retained
interest in the CarMax Group . The company continues to expect
that the CarMax business will contribute approximately 13 cents per share to
the Circuit City Group's earnings in the current fiscal year.
"Our remodel schedule remains on target with 383 stores currently
complete," said McCollough. "We look forward to the launch of nationwide
advertising for our expanded product categories -- entertainment software,
video games, digital and 35 mm cameras and computer software, peripherals and
accessories -- in time for the holidays. We also remain excited about our new
store design and the full remodel of our store base across the next three
years.
"We will begin next year's remodels in January of the current fiscal year,
and the fourth quarter earnings expectations reflect that remodel plan," said
McCollough. "During the upcoming fiscal year, we expect to complete remodels
of approximately 140 stores, relocate 10 to 15 stores and open approximately
25 new stores to reflect the exciting, contemporary design we are introducing
this fall.
"We remain extremely excited about the longer term product opportunities
in our industry and continue preparing our stores to take full advantage of
that opportunity," said McCollough.