Circuit City Q4 Sales Flat; Best Buy Gains Share

Richmond, Va. — Circuit City's domestic sales were flat during its fiscal fourth quarter, ended Feb. 28.

Net sales for its U.S. operations were $3.3 billion, matching the prior-year period, while same-store sales, which now include extended warranty, installation and other service-related sales, slipped 1.8 percent. Previously, comp-sale calculations were limited to revenue from merchandise. Without the accounting change, comps were down 2.9 percent.

Fourth-quarter comps were impacted by last year's changes in Circuit City's sales models for its Verizon wireless and DirecTV satellite businesses, the company said.

On the product front, top fourth-quarter growth categories included flat-panel displays, with triple-digit comp gains, and portable and mobile audio (principally MP3 players and satellite radio), which both enjoyed double-digit hikes.

Sales laggards included tube TVs, desktop computers and accessories, DVD players, satellite service, gaming and home audio, which all experienced double-digit declines.

Despite the weak comps, CEO Alan McCollough said sales trends have improved since December, thanks to increased traffic, spurred by enhanced “promotional and advertising effectiveness.”

Web-based sales from Circuit's next-generation e-commerce site also generated strong results, McCollough said, and the company expects to continue expanding the channel.

Looking ahead, the chain expects to open 30 to 40 superstores this year, half of which will be relocations.

By comparison, Best Buy's total domestic revenue was up 8 percent to $8.2 billion for the fiscal fourth quarter ended Feb. 26, while comps were up 3.1 percent [see TWICE, March 7, p. 1.], leading the company to conclude that its total market share grew to about 17 percent during the period.

The best performing category in the quarter was major appliances, whose comp sales rose by the mid-teens, thanks to new product introductions and effective promotions that garnered continued market share gains in refrigeration.

Looking ahead, Best Buy expects digital TVs' sales share to continue to grow, thanks in part to improved supply and more affordable pricing. In computers, the company anticipates growing consumer interest in media center PCs this year, and will double the number of Geek Squad employees as the service targets small business customers in select markets.

In entertainment software, the chain will launch tailored CD and DVD assortments in many of its domestic flagship stores, and will shift a portion of its CD selling space to DVDs. In gaming, Best Buy expects the category to benefit from the launch of PlayStation Portable this spring, the launch of Xbox2 next winter and improved supplies of existing video game hardware platforms.