RICHMOND, VA. -Comparable-store sales at the Circuit City Group dropped 20 percent during the last two months of the fiscal fourth quarter ended Feb. 28, and subsequently, the retailer issued layoffs of about 300 employees at corporate and division offices.
Concerning the layoffs, Circuit City chairman/CEO Alan McCollough said, "We are closely examining our cost structure to ensure that we are operating as productively as possible." He added that the retailer, even before the corporate reductions, had narrowed its field organization structure because it had recognized that new store openings and remodels will be limited in the coming year.
Circuit City said the reduced sales were due to the absence of its disbanded appliance business, significant softness in desktop PC sales, a general softening across all other categories and a difficult prior-year comparison. The results follow a decline of only 1 percent in comp-store sales, including the appliance category, during December.
Total fourth-quarter sales for the Circuit City Group declined 9 percent to $3.18 billion, down from $3.48 billion in the year-ago fourth quarter. Comp-store sales for the fourth quarter dropped 11 percent. Excluding the appliance category, from which Circuit City exited during the third quarter, comp-store sales declined 2 percent.
For the fiscal year, total sales for the Circuit City Group were off 1 percent to $10.46 billion, compared with $10.60 billion in the prior year. Comp-stores sales declined 4 percent, but excluding the appliance category, increased 3 percent.
Video product sales enjoyed the largest fourth-quarter percentage increase among Circuit City's merchandise-sales-by-category statistics, climbing from 34 percent to 38 percent of the retailer's total.
Information technology, the second largest category, which includes computers, gained a single percentage point to 35 percent, while audio remained at a 17 percent share. Entertainment climbed four percentage points to a 10 percent share, while the appliance share of 9 percent last year dropped to zero.
For the fiscal year, the video category gained three percentage points to 35 percent, equaling the share held by information technology, which moved up from 33 percent the prior year. Audio remained at 16 percent, entertainment moved from 5 percent to 7 percent, and appliances dropped from a 14 percent share to 7 percent.
"We continue to see strong sales increases in new technologies, and in the new and expanded categories now offered in the former appliance space," said Circuit City Stores chairman/CEO Alan McCollough.
McCollough, who said the company is looking at a new fiscal year with an anticipated soft economy during at least the first half, projects the January and February slowdown will continue into the fiscal first half. He expects comp-store declines of about 20 percent during the first two quarters, a low single-digit decline in the third quarter, and a return to comp-store sales growth in the mid single digits by the fourth quarter.
Looking ahead to fourth-quarter and fiscal-year earnings, the retailer said generally healthy sales in December, along with a general fall-off in sales across all categories since that time, are reflected in earnings expectations for the business.