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Circuit City Fiscal Q1 Sales Drop 23%, Comps Off 25%

6/15/2001 11:05:00 AM Eastern

Richmond, Va. - Taking it on the chin from the double knockout punch of the absence of major appliances and industry-wide weakness in personal computer sales, the Circuit City Group reported a 23 percent drop in revenues for the fiscal first quarter.

Total sales reached $1.88 billion, down from $2.45 billion in the year-ago three months.

Comp-store sales tumbled 25 percent in the first quarter, ended May 31, compared with the same quarter in 2000. Excluding majaps, which Circuit City exited in last year's third quarter, comp-store sales dropped 13 percent in the first quarter.

Net results for the Circuit City Group before inter-group interest in CarMax produced a loss of $9.6 million, compared with earnings of $46.7 million in the first quarter of 2000.

W. Alan McCollough, president/CEO of Circuit City Stores, who said he is both disappointed with the sales performance and cautious in his outlook for the future, believes the introduction of the Windows XP operating system later this fall will help strengthen the sales pace in the home office business. The intro will help generate sales of computers as well as computer peripherals and accessories, he said.

'The strongest sales growth [in the first quarter] was in technologies new to consumers, including digital televisions, cameras and camcorders; personal digital assistants; and new products we have added to the store - 35mm cameras, expanded video game hardware and software selections and an increased number of DVD titles,' said McCollough.

The combination of a slowdown in computer sales and strength in higher tech products, however, helped Circuit City boost its gross profit margin 20 basis points to 24.6 percent in the first quarter, up from 24.4 percent in the same period last year.

Summarizing what Circuit City is doing to turn around the business, McCollough pointed to an attractive product offering, improved consumer service and elevated levels of cost efficiency in its overall operations.

During the quarter, Circuit City reduced its advertising expenditures, but said it increased the effectiveness of its ads through format and creative approach. A traditional campaign for gift-giving, helped strengthen the sales pace late in the quarter, said the retailer.

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