RICHMOND, VA. -Lower-than-expected sales in late September and October forced Circuit City to revise earnings expectations downward for the fiscal third quarter ended Nov. 31.
This marks the third time this year Circuit City has dropped its profit outlook, causing concern that stretches into the upcoming holiday period.
Circuit City's slower sales outlook late last month hit hard at the company's stock, and on the day of the warning caused shares to dip 36 percent to $13.82, nearly five times lower per share than its 52-week high.
Alan McCollough, president/CEO of Circuit City Stores, told financial analysts in a conference call late last month that Circuit City expected sales to drop in August and September as its stores were re-merchandised following the decision in July to abandon major appliances. But sales unexpectedly turned much lower in mid-September and into October.
"Although we had anticipated modest sales disruption related to our exit from the appliances business and the partial remodel of all stores," McCollough said in a statement, "since the end of September, sales have softened significantly in virtually all product categories-including those not affected by the remodeling process.
"While new or more complex technologies such as digital televisions, camcorders and cameras remain our strongest products, the slower sales pace extends to most categories in the store."
McCollough, who cited significant variations in monthly sales as a key reason for the revisions, said the chain had initially expected comp-store sales growth in CE and home office products, not affected by the remodeling program, to remain at higher early-summer levels into the third and fourth quarters. "However, if the sales pace we have seen over the last four weeks [the last week in September and first three weeks in October] continues, we would instead anticipate a third-quarter comp-store sales decline in the mid-single-digit range."
Circuit City's schedule for store remodeling remains on target, he said, with 383 units currently complete.
"We look forward to the launch of nationwide advertising for our expanded products categories-entertainment software, video games, digital and 35mm cameras and computer software, peripherals and accessories-in time for the holidays," McCollough said.
"We also remain excited about our new store design and the full remodel of our store base across the next three years ... During the upcoming fiscal year [beginning in March 2000], we expect to complete remodels of about 140 stores, relocate 10 to 15 stores and open about 25 new stores to reflect the contemporary design we are introducing this fall."