Circuit City Group's Q4 Sales, Earnings Drop
By Jeff Malester -- TWICE, 4/16/2001
RICHMOND, VA. — Hard hit by a late-year softening that impacted all consumer electronics categories, especially desktop personal computer sales, fourth-quarter earnings from continuing operations at the Circuit City Group, nose-dived about 70 percent to $95.4 million, down from $161.5 million in the same prior-year period. The numbers exclude the Group's retained interest in the equity of Circuit City's CarMax Group.
Sales for the Circuit City Group in the fourth quarter ended Feb. 28 declined 9 percent to $3.18 billion, compared with $3.48 billion in the same three months last year. Comp-store sales dropped 11 percent in the fourth quarter.
Earnings from continuing operations at the Circuit City Group for the fiscal year rocketed downward to $115.2 million, compared with $326.7 million in the prior fiscal year year. These numbers also exclude interest in the CarMax Group.
Total sales for the fiscal year declined 1 percent, dropping to $10.46 billion, compared with $10.6 billion the previous year. Comp-store sales declined 4 percent for the 12 months.
Excluding the major appliance category, which declined significantly beginning late in the first quarter, and from which the company completed its exit during the third quarter, comp-store sales dropped 2 percent in the fourth quarter, but rose 3 percent for the fiscal year.
"The comparable store sales pace for our Circuit City business was erratic throughout the fiscal year," said Alan McCollough, president/CEO. "Sales were strong across virtually all categories early in the year, but the major appliance business especially softened late in the first quarter. We experienced a general softening across categories in the third quarter, followed by an improved sales pace in December, and then a more significant fall-off in January and February.
"Throughout the year, we have experienced declines in average retails for more traditional consumer electronics, but double- or triple-digit comp-store sales growth in some of the newest technologies, and in new or expanded categories in the stores," said McCullough.
Excluding majaps, the Circuit City Group's gross profit margin decreased 100 basis points to 24.4 percent in the fourth quarter, down from 25.4 percent in the same three months last year. Including majaps, the decrease was 30 basis points. For the year, excluding majaps, gross profit margin was down 70 basis points to 24.7 percent, compared with 25.4 percent in the prior 12-month period. Including majaps, margins decreased 110 basis points for the year.
"The gross profit margin was reduced by one-time costs of $28.3 million and merchandise markdowns of $28 million associated with our exit from the appliance business," said McCollough. This was also affected by "significantly lower appliance gross margins prior to our announced plans to exit the business and a merchandise mix that included a high percentage of traditional products that carry lower gross profit margins," he said.
