Tuesday, May 01, 2007

Circuit City's Q1 Numbers Go Down The Drain, Only CC Management Surprised

This just in from the Department of Pointing Out the Obvious:

NYT: Circuit City Expects Q1 Loss
RICHMOND, Va. (AP) -- Circuit City Stores Inc., which has laid off workers and closed stores in an effort to cut costs, says it expects to post a first-quarter loss because of poor big-screen TV sales and is withdrawing its earnings outlook for the first half of the fiscal year.
The electronics and entertainment retailer said it now expects a loss from continuing operations before income taxes of $80 million to $90 million for the first quarter of its 2008 fiscal year because of ''substantially below-plan sales,'' especially of large flat-panel and projection televisions.


President and Chief Executive Philip J. Schoonover said the company is ''moving with increased urgency'' to accelerate its restructuring efforts.
''Although the first half of the fiscal year will be volatile due to the change in the television business, we believe that our transformation efforts will yield positive results for the full fiscal year,'' Schoonover said in a statement.

None of this should come as any surprise to anyone who either has comprehensive experience in retail strategy or who regularly reads this blog. I think that I have pilloried Circuit City once or twice already.

Two things: Circuit City didn't take a bath in Q1 because of poor big-screen TV sales. Poor sales are a symptom. That's like blaming a runny nose for your flu. Their numbers suck because their strategy is adrift, their advertising is ineffective, their store personnel are dispirited and unskilled, and oh, just maybe, there is some ill-will amongst consumers in reaction to all their bad press.

Second, regarding Mr Schoonover's stated claim that they are ''moving with increased urgency," that is management speak for "none of us know what to do, please send help." In large organizations there are typically two speeds in the gearbox: Glacial and Panic. Fat, lazy companies tend to coast on the status quo, smug in their own existence until an event awakens them from their slumber, and give orders like "Battle Stations" or more often "Abandon Ship!" Typically, by the time they've reacted to a new threat on the radar, it's too late.

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