- Went from ten to eight operating regions and changed the regional leadership team structure in the first quarter.
- Changed the management model in all stores at the end of May, creating a new supervisor role that provides additional leadership to associates.
- Rolled out new operating procedures across all stores, training 40,000 plus associates.
Focus has now shifted to the creation of two to three customer focus areas, allowing boundless selling, allowing associates to move freely throughout their area and this is expected to be completed in September.
As a group, the learning centers are outperforming the control stores by more than 6% in sales per labor hour and more than 3% in total sales.
Going forward, efforts will be on closing the performance gaps among regions, districts and stores by using a combination of best practices, contest and accountability to quickly close these gaps as well as labor productivity to improve conversion rates.
Retail point of sale system, RPOS.
- The RPOS have been rolled out to 134 stores, though new system implementation is limited to new stores only.
- The deployment of RPOS is expected to be concluded post holiday.
Fiscal 2008 Outlook
- Continued weakness with a net loss from continuing operations less than that of the second quarter, resulting from stabilizing performance levels.
- Expects to deliver a net profit for the fourth quarter and a full-year net loss from continuing operations.
- Expects to open 60 to 65 incremental and relocated domestic segment Superstores in fiscal 2008.
Key questions and answers from the second quarter earnings call conducted by Circuit City Stores, Inc. (CC: chart) on September 20, 2007.
Danielle Fox (Merrill Lynch):
Were all your stores generally loss making this quarter?
Bruce H.Besanko: The only trend that we saw was in the West Coast, and in particular, California, and the Southeast, and those did under-perform relative to the other areas.
Danielle Fox (Merrill Lynch):
It sounds like a good idea to slow the pace of store openings. Why not just close that bottom group of underperforming stores?
Bruce H. Besanko: We do look at the store performance on a store class. There weren’t significant levels of difference among many of our store classes but for the 20K that outperformed the other store classes.
As part of the real estate analysis that we will undertake, we will look at our store closing criteria.
Danielle Fox (Merrill Lynch):
Are there some stores that are poorly located and a function of being old?
Bruce H. Besanko: Whether the store was older or newer, these stores for the most part are all cash flow positive.
Stephen Chick (J.P. Morgan):
Can you comment on the sequential improvement in sales through the quarter?
Danny Clark: As the quarter started out, we were in the middle of a tremendous amount of change. We had just come off going from 10 to eight regions. We changed the management model in every store that we had, and then we started the changes in the labor model. We had 40,000 people learning a new job and that created a distraction. What we have learned from our regional learning centers is it takes about four to eight weeks for the change to settle in and as the change was getting behind us month to month, our stores began to stabilize
Stephen Chick (J.P. Morgan):
Looking at the enterprise value company that the equity market is assigning, it is cheap from a retail perspective. When will you to think of something more strategic possible for the whole company?
Philip J. Schoonover: We had a permanent change to the business model that Circuit City was disproportionately impacted by because of our strength in the video business last October through December.
We quickly deployed a team against the SG&A work, identified $150 million, and they handily have achieved materially taking that cost out.
