Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, June 29, 1993 TAG: 9306290022
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: By Richmond Times-Dispatch
DATELINE: RICHMOND (AP) LENGTH: Long
It operated stores mostly in the mid-Atlantic region and in the South under a variety of names, each with a different focus. There were warehouse-showrooms that sold television sets and major appliances, small stores that carried only electronics items and leased space inside discount department stores.
The company was known as Wards television stores, and later as Wards Loading Dock or Sight 'N Sound stores. Although the Circuit City name began popping up on storefronts in the early 1980s, the corporation didn't adopt the name Circuit City Stores Inc. until 1984.
Even during a stock offering about 10 years ago, the New York investment world was a little skittish about Circuit City and a meeting the company had planned with analysts was canceled for lack of interest.
But now, the home-grown company that began in a small storefront on West Broad Street in Richmond in 1949 has evolved into the country's largest retailer of brand-name consumer electronics.
Sales have increased at the Richmond-based retailer more than nine-fold during the past 10 years. They hit the $3 billion-plus mark last year.
The number of stores has jumped about 250 percent during the same time. The chain operates more than 265 stores nationwide and expects to have almost 300 locations in 21 states and the District of Columbia by the end of the year.
Its stock has increased at an average annual rate of 50.5 percent over the past 10 years, beating all of its industry peers and placing it at the top of Fortune 500 service company's rankings for having the highest return to investors.
The chain is leaps and bounds ahead of its closest competitor, the Minneapolis-based Best Buys Co. Inc., which is about half the size of Circuit City. Highland Superstores, another longtime competitor, which once held the No. 2 spot, went out of business this spring after expanding too rapidly in its effort to take on Circuit City.
Circuit City has muscled into consumer electronics retailing mostly in the Southeast, Midwest and West.
And it is one of the few retailers that owns a bank just so it can issue its private-label credit cards to customers. The bank, established in 1990, also is believed to add significant contributions to the chain's annual earnings.
Industry analysts and investors generally have nothing but praise for Circuit City and its past performance.
"It truly is one of those rare stellar companies of the past decade," said retail analyst Kenneth M. Gassman Jr., with Davenport & Company of Virginia Inc. "It's like a thoroughbred horse."
The giant consumer electronics retailer has aggressive expansion plans that will take it from $3.2 billion in annual sales last year, a 17 percent increase over 1991 results, to revenues exceeding $10 billion by the end of the decade.
The chain will do most of its expansion by opening more superstores, a concept it pioneered in the 1970s. The superstores sell a large selection of audio and video equipment and major appliances, and recently began selling computers and music.
"We clearly believe the future for us is the superstore in large metropolitan areas," said Richard L. Sharp, the company's president and chief executive officer.
While many smaller regional consumer electronics companies tinkered with the style of store during the early and mid-1980s, Circuit City had its format down pat and began rolling out its superstore nationally.
"It became a question of execution, of who could do it better," said Edwin L. Underwood, an analyst who follows Circuit City for Richmond-based Scott & Stringfellow Inc.
Circuit City is nearly halfway finished with its superstores plan. This year it will open 14 stores in the Boston area and 16 in the Chicago area - both new markets for the chain.
Among the areas the company is exploring:
Opening smaller stores in Fredericksburg and Harrisonburg later this year to test whether a store design can be used to penetrate the country's smaller markets.
Using the prototype store, Circuit City hopes it can capture some of the potential $12 billion market in smaller cities.
The units will have 8,000 to 12,000 square feet of space, compared with 32,000 square feet in a typical superstore.
Opening stores in four new markets next year - Minneapolis; New Orleans; Kansas City, Mo.; and Little Rock, Ark.
The Minneapolis store will put Circuit City on its No. 2 competitor's home turf. It already competes head-to-head with Best Buys stores in Texas and Missouri and will soon do so in Chicago.
Getting into the used-car business at a 15.4-acre site outside Richmond. The lot is expected to offer up to 500 used cars. Construction will begin soon, and plans call for an opening in early fall.
Changing the name of some of its mall-based stores from Impulse to Circuit City Express. The first Impulse stores opened in 1988 in Richmond and two other markets; they now number 39.
At the same time, the company is re-evaluating its mall-based chain. Some of the stores are doing very well, Sharp said; others aren't.
"There will be very limited, if any, expansion of the mall format this year," he said. "We're going to manage this business for a while, continue to refine the concept, and determine how we can make sure the future stores, if any, are like the ones that are doing very well . . . "
Experimenting with the mail-order business. The company has run full-page ads in USA Today selling electronic items under "The Intelligent Choice" name. Circuit City once used "the intelligent choice" slogan as part of an advertising campaign.
Consumers are able to buy any of eight items in the ads by dialing a 24-hour toll-free number.
Installing high-end audio and video systems in Southern California homes. It started as a test program; now it is now available in all its Los Angeles-area stores.
The program has been a success, Sharp said, but the chain likely won't try to establish the program nationally. It could be available in selected markets with large populations and a high concentration of affluent customers.
Analyst H.B. Thomson with Wheat, First Securities Inc. said Circuit City is a company that does a great job in retail research and development.
It must constantly test its limits and improve its offering to consumers to stay competitive, Sharp said.
For instance, the chain plans to connect customers with specialists through its Answer City toll-free phone service later this year. Customers will be able to ask operational questions about the products they have just purchased.
Circuit City also will try to go national with its One-Stop shopping program where sales personnel not only will sell merchandise but ring it up as well.
Both were tested in the Richmond area first, and both are possible thanks to technology, Sharp said. Computer systems have not only gotten more sophisticated, but computer hardware is cheaper.
"Many inventions after they're created seem pretty obvious," Sharp said. "Some of these ideas we've had for some time and we've had to wait for the technology to catch up to us so we could afford it."
by CNB