Circuit Breaker

Circuit City Stores (Richmond, Va.) has announced a reduction of 300 employees in its corporate and division offices, stemming from the recognition that “new store openings and remodels will be limited in the coming year.” The announcement came as the electronics retailer released earnings expectations for its fourth quarter and fiscal year, ending Feb. 28, 2001. It is expected to release sales results on March 6.

“The fourth quarter results reflect generally health sales in December, which is the highest-volume month of the quarter,” said W. Alan McCullough, president and ceo of Circuit City Stores. “Since that time, we have experienced a general fall-off in sales across all categories. As we look at the coming fiscal year, we must plan conservatively and assume these patterns will not change dramatically during the first half. We are closely examining our cost structure to ensure that we are operating as productively as possible.”

McCullough says the staff reductions “create a span of control similar to other retailers in our position on the growth curve.” There has been some speculation that the company's reductions will include the staff in its store planning and construction departments at the headquarters level, with some of that responsibility being outsourced to an independent contractor.

Circuit City consists of two separate business divisions: Circuit City Group, the No. 2 electronics retailer in the U.S. (behind Best Buy), with about 630 stores; and CarMax Group (in nearby Glen Allen, Va.), which runs 40 used-car superstores. Of Circuit City's stores, 594 are superstores selling such items as audio and video equipment and computers. The company also has about 40 Circuit City Express mall outlets. Over the last couple of years, the retailer stopped selling appliances in favor of more profitable items, including home office products, and announced a large-scale program to remodel its superstores. That program remains in doubt in light of today's staff-cutback announcements.