With U.S. same-store sales plunging by 12 percent in the U.S. for December, Circuit City Stores Inc. (CC) same-stores sales company-wide dropped by 11 percent.
The fairly strong increase of international same-store sales of 6.5 percent wasn't enough to offset the losses.
Overall net sales fell by 8.9 percent, to end the month at $1.92 billion.
CEO Philip J. Schoonover said, "Our sales performance, while disappointing, was in line with our expectations. The company saw significantly improved performance over the last two weeks of the month, but the sales improvement was not enough to offset the weakness experienced at the beginning of the month."
In December 2006, Circuit City enjoyed a healthy 4.2 percent increase in same-store sales, with the U.S. stores performing well with 4.6 percent growth.
It seems no matter what medicine is given to the company, it doesn't respond with sales growth. As a matter of fact, some of the changes seem to have hurt rather than helped sales.
One that probably hurt a lot was the cutting back of labor and changing of procedures to cut losses. I've managed retail businesses before, and there's nothing more discouraging than cutbacks in labor which make remaining employees feel they are given a task they can't realistically perform. That seems to be part of the problem with Circuit City. It's the old catch-22, where you've got to cut labor costs, but cutting labor costs results in losing sales.
One metric that showed this could have really hurt the company was with the sales of extended warranties. Last year they came in at $52 million, while this year they dropped almost $16 million to finish at $36.1 million for December.
Some of that was related to replacing experienced people with lower cost labor.
Some of the good performers for the company were global positioning systems, digital imaging products, flat-panel TVs, notebook computers and video gaming products.
Installation of theater systems and services related to PCs grew revenue by a healthy 15 percent.
Underperformers were video products and software, music software, projection TVs, desktop computers, audio products, DVD hardware and camcorders.
Just got word today (Wed. Jan. 9) via internal DPS E-mail system that CEO Phil Schoonover will be stepping down effective Thurs. Jan. 31, 2008. Apparently his resignation was called for at a recent board meeting after stockholders hounded the board to find a replacement. The memo also says interim CEO will be George D. (Danny) Clark, Jr. (Executive Vice President, Multi-Channel Sales) until a replacement for Schoonover is found. A press release will most likely follow in the next few days
Mikael Salovaara, the lead Board Director, was the first to call for Schoonover's resignation. With his background at Goldman, Sachs he most likely isn't buying into Schoonover's transitioning plans.
Although the change is needed, this probably means bad news for the company because the road to recovery is a long and treacherous one for electronics retailers. Tweeter and CompUSA are the perfect examples and unfortunately Circuit City may not be far behind.
Posted by: Eric | January 9, 2008 10:05 PM | Permalink to Comment