Data Drill Down: Circuit City’s Store Closings Focus on Specific Markets
On November 3rd Circuit City
confirmed it would close 155 stores this week. Over the weekend, hundreds of jobs were said to be shed at the chain's headquarters,
according to the Richmond-Times Dispatch. The New York Stock Exchange also notified Circuit City that it would face delisting if its stock price didn't come above $1 per share.
In light of the data reported in its yearly 2007 and 2008 reports, Circuit City's first two quarterly 10-Q for fiscal year 2009 (starting on March 1st, 2008) show a very rapid reversal in same-store sales that no doubt forced the company to make these drastic decisions.
Dropping Same Store Sales
Same store sales from domestic superstores (i.e. excluding a few outlets and sales abroad) grew by 8.3% in FY '06 and 6.1% in FY '07, only to recede by 8.1% in FY '08 and yield another 14.4% for the first half of 2009. As of February 2007 Circuit City planned 100 openings in FY 2009 (one third of them relocations). By February 2008 the company had cut back its FY '09 plans to a still healthy 45-55 openings.
Store count had been rising by an average 1.9% per year for the last seven years and peaked slightly above 700 in April/May 2008. However, with the sweeping November cuts, the company will finish the year around 570 stores, behind the 594 it operated in 2001, thus canceling almost a decade of territorial growth.
Store Closings by State
Mapping Circuit City's closings shows some states were hit much more than others. The retailer is almost giving up on Arizona and Georgia, cutting the total in these two states from 39 stores to just seven. The interactive map of closed stores below illustrates a high density around Los Angeles, San Francisco, Phoenix, Atlanta, Chicago and New York, and suggests some of these stores were competing with each other in overlapping trade areas.
Leases to be re-negotiated
Unlike many retailers which own a significant part of the stores they operate, Circuit City leased all but 5 of its domestic stores at the end of FY 2008. The company now needs to negotiate leases that may expire as late as 2025.
Superstores prior to fiscal 2001 used a showroom model which required staff to retrieve all products from the warehouse. New or remodeled stores since then feature on average 72% of selling area (all products except the biggest can be picked up directly by customers). At the end of FY '08, 372 stores were of the showroom legacy type while 247 followed more modern prototypes. Circuit City has not released which type of stores it just closed. Its FY '09 yearly report will probably reveal to what extent the November store closings will have been used as an opportunity to accelerate the transition to self-service stores. The average Circuit City superstore employs Superstores an average of 59 full time and part time associates on a total surface of about 30,000 square feet.
Circuit City vs. Best Buy
As recently as 2003 Best Buy and Circuit City were neck to neck as far as store count is concerned, each in the 550-600 range. Five years later, Best Buy now leads by more than 40% with almost 1,000 stores in the U.S. Among states where both retailers are most present, only Florida and Pennsylvania remain balanced, while others generally see Best Buy operating 60% or more of the total from both companies. At its new, reduced scale, Circuit City will also probably lose its second place in the consumer electronics market to Wal-Mart.
Data Sources
Data compiled by RetailerDaily from Circuit City and Best Buy annual and quarterly reports and investor kits. A geo-tagged list of the 155 closed stores, as well as the tables and charts used in this article, can be found in the Excel file below.
