Q3 Comp Sales For Circuit City Decrease 4.3%
By Alan Wolf -- TWICE, 12/20/2004
RICHMOND, VA. — Less aggressive music and movie promotions, limited quantities of Black Friday door-busters, and changes in the way its sells satellite TV and wireless phone service contributed to a 4.3 percent decline in Circuit City's same-store sales during its fiscal third quarter.
For the three months ended Nov. 30, total domestic sales edged down 2.1 percent to $2.4 billion.
Chairman/CEO Alan McCollough said a strategic decision to be less promotional than last year in music and movie software led to slower traffic and sales, while the decision to limit quantities of its most deeply discounted Black Friday specials hurt revenue on the day after Thanksgiving.
The results mirror those of Wal-Mart, which experienced sharply lower sales — and a media drubbing — for setting more rational post-Thanksgiving pricing. Analysts had also expected a stronger showing from Circuit City, given an easy year-ago comparison when same-store sales slipped 1 percent.
McCollough said the disappointing results were also caused by changes in the chain's satellite TV and wireless phone business models. During the second quarter, the company sought to substitute lower hardware cost for DirecTV activation revenue, and in the third quarter made Verizon its sole wireless carrier, which began selling its products and services from dedicated in-store shops. In exchange for operating the shops, Verizon keeps the revenue from service plan upgrades and sales of handsets and accessories, while Circuit now only receives revenue for each new handset activation.
On the product front, the retailer enjoyed triple-digit comp sale gains in plasma displays and double-digit increases in LCD flat panels, although both were offset by double-digit declines in direct-view TV, DVD players and DirecTV sales. In audio, double-digit gains in MP3 players and satellite radio were partially offset by double-digit declines in home audio, while double-digit gains in notebook computers were partially offset by double-digit declines in sales of desktop PCs and peripherals.
McCollough noted that Circuit City's recently revamped e-commerce site is generating “strong growth” in online-originated sales, reflecting positive consumer reaction to the redesign.
On the store front, 18 superstores were opened during the quarter, 12 were relocated and one was remodeled. The company expects to open another nine superstores and relocate seven more this quarter.
