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Circuit City’s Upgrades Gain Traction

6/17/2005 11:56:00 AM Eastern

Richmond, Va. — New initiatives to upgrade and evolve Circuit City’s business are beginning to bear fruit, senior executives said today, as reflected in higher attachment rates, more effective promotions and less net-owned inventory.

One example of early success is plasma TV, which president Phil Schoonover described during a conference call as a “high-priority, stake-in-the-ground” category that drives high margin add-on sales of extended warranties and accessories. According to The NPD Group, Port Washington, N.Y., Circuit City’s share of plasma TV unit volume rose from 15 percent in October to nearly 22 percent in April, Schoonover said, thanks to improved in-stocks, an expanded assortment, increased labor and training, and investments in pricing, promotions, financing, advertising and display space.

The company will continue to press its flat-panel gains by further expanding its plasma assortment from 11 to 16 SKUs and its LCD assortment from 36 to 49 SKUs in most stores, while reducing its analog TV offering, he said.

By contrast, Schoonover described Circuit City’s first-quarter PC performance as “unacceptable” due to poor forecasting and replenishment, and a last minute shortfall in promised notebook allocations by an unnamed vendor. To address the situation, the company has appointed John Kelly as senior VP/general merchandise manager for IT and Elliot Becker as his merchandise manager, and will focus on “better product lifestyle management” by both its vendor and the team of Ron Cuthbertson, a Best Buy veteran who recently joined Circuit City as senior VP/supply chain and logistics.

Other company-wide initiatives include:

  • More “sophisticated,” category-focused marketing, vs. the previous “brute force” approach;

  • Increased use of auctions, vendor partnerships and direct factory sourcing to control costs;

  • The rollout of a new point-of-sale system, slated for the back half of fiscal 2007;

  • National and regional pricing management;

  • Greater “employee engagement” within the core TV, PC, mobile and digital imaging departments;

  • Improved online checkout functionality;

  • The use of outside consultants, including Infinitive and Boston Consulting Group, to “capture revenue and margin improvements in our merchandising and marketing functions …develop andexecute innovation initiatives that will drive the long-term growth,” and to help launch the company’s first-ever catalog, slated for the back-to-school period.

Circuit City will assess these efforts early next year and “choose the best initiatives to roll out,” Schoonover said.

Meanwhile, the company will expand its in-store IQ Crew tech support pilot program from 100 stores to all 620 locations this quarter, and will test elements of its in-home PC repair and home-theater installation services this fall. The company wouldn’t reveal what form those programs would take, although Schoonover suggested that they could involve “unconventional partnerships.”

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