This summary is based on the first quarter fiscal 2009 earnings call conducted by Circuit City Stores Inc. (CC) on June 19, 2008.
Management:
Chairman, President and CEO: Philip J Schoonover
EVP and CFO: Bruce H Besanko
EVP and COO: John T Harlow
SVP and CMO: John J Kelly
Director, Corporate Communications: Bill Cimino
Key Investor Issues:
- Quarterly net sales dipped 7.4% to $2.3 billion.
- Loss per share was $1 compared with loss per share of 33 cents in Q1 of 2008.
- Q2 loss from continuing operations is forecast to be about $170 million to $185 million.
First-Quarter Financial Highlights:
Domestic Segment Sales:
- The net sales decreased 8.8% to $2.17 billion from $2.38 billion in the same period last year.
- The comparable store sales decreased 12.25 during the quarter.
- The direct channel sales, including Web and call center-originated sales, grew 3%.
- The direct channel sales growth was lower than historical year-over-year growth due to a less aggressive promotional stance in categories such as PC hardware and TVs as the company seeks to maximize gross profit.
- During the quarter, the domestic segment opened five incremental Superstores and closed two other locations.
- Of the incremental Superstore openings, three were in the company’s city(TM) format.
- In the video category, the company generated a slight double-digit comparable store sales decrease in Q1.
- The comparable store sales of flat panel TVs increased by a high-single digit.
- The total TV comparable store sales recorded single-digit decrease, as significant comparable store sales decreases in projection and tube TVs more than offset the flat panel TV increase.
- The comparable store sales of digital imaging products and accessories and camcorders dropped by double digits.
- In the IT category, the company generated a high single-digit comparable store sales decrease during the quarter.
- The comparable store sales of desktop computers dipped by double digits and comparable store sales of notebook computers increased by a low single-digit.
- In the audio category, the company generated a double-digit comparable store sales decrease in the quarter.
- The comparable store sales of navigation products increased by a low single-digit.
- The comparable store sales of portable digital audio, mobile and home audio products declined by strong double digits.
- In the entertainment category, the company generated a high single-digit comparable store sales decrease in the first quarter.
- The comparable store sales of video gaming products increased by double digits.
- The comparable store sales of video software and music software declined by double digits.
- The domestic segment extended warranty net sales were $53.8 million or 2.5% of domestic segment net sales versus $73.7 million or 3.1% of domestic segment net sales in Q1 of 2008.
- Firedog PC services and home theater installation revenues eased 16% to $54.3 million from $64.4 million in the year ago quarter.
- Firedog services and home theater installation revenue performance in the prior year period was the second highest year-over-year dollar increase in the company’s history due mainly to an effective home theater installation bundle offer and the benefits of the launch of Microsoft Windows Vista.
International Segment Sales:
- Q1 net sales increased 23.6% to $134.3 million from $108.6 million in the same period last year.
- The increase was fueled by the favorable impact of fluctuations in foreign currency rates of 14% and the comparable store sales increase of 10.5% in local currency.
- The increases were mainly offset by the impact of the year-over-year net decrease of 25 retail stores and dealer outlets.
The domestic segment gross profit decreased 186 basis points from last year.
- A decrease in product margins was driven by negative mix shifts within imaging and notebook computers as well as clearance activities and an increase in the mix of sales of notebook computers.
- The decrease in gross profit margin was also due to a decrease in extended warranty net sales.
- The year-over-year change in the gross margin rate was the smallest decline in five quarters.
The international segment Q1’s gross margin declined 337 basis points from the last year period.
- The decrease resulted from an increased mix of sales from clearance product across many categories as well as a mix shift from higher-margin categories
