The Fall of Circuit City Stores, Inc.
Essay by SiddharthaP • September 20, 2015 • Case Study • 656 Words (3 Pages) • 1,317 Views
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THE FALL OF CIRCUIT CITY STORES, Inc.
CASE SYNOPSIS:
- Circuit City, the leader in consumer electronics retailing for over 20 years was forced into liquidation. At last it has to liquidate its remaining 567 U.S. stores.
- Circuit City Superstores were between 30,000 & 40,000 sq. feet in size and carried consumer electronics & appliances, each store having 50% space devoted to selling space and rest for storing.
- Best Buy is the main competitor of Circuit City.
- The Circuit city business peaked in the year 2000, with sales 17% higher & operating profits up 86% for an all-time high of $541 million.
- But there is a collapse running in the background since the advent of Best buy which has been slow and painful, though it saw few reprieves in the middle.
CASE PROBLEM:
Why did Circuit City fall so painfully?
CASE ANALYSIS:
HISTORY:
- In 1949, Samuel S. Wurtzel took the advantage of opportunity of first TV station going on air & rented 1,200 sq. feet of store in Richmond, Virginia.
- Made public offerings in 1961 and started expansions in 1970.
- Loading dock proved successful and added 7 more units in 1981 and changed the name to Circuit City Superstores.
- It grew rapidly reaching 96 superstores and 23 regular stores by 1989
PRODUCTS and SERVICES in CIRCUIT CITY:
- TV & Home entertainment
- MP3 & Audio devices
- Cameras & Camcorders
- Computers
- Movies
- Phones
- Firedog(Repair and Installation)
Competitors:
- Best Buy
- Wal-Mart
- RadioShack
- Home Depot
FINANCIAL ANALYSIS:
Trading and P&L account of circuit city |
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Fiscal year | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | Comparartive Statement of year 1999 & 2008 |
sales(in mlns) | $9,338 | $10,599 | $10,458 | $9,590 | $10,016 | $9,778 | $10,478 | $11,598 | $12,430 | $11,744 | 20.49% |
operating profit(in mlns) | $291 | $541 | $323 | $237 | $60 | -$6 | $87 | $211 | $122 | -$349 | 183.38% |
Gross profit | 25.00% | 26.00% | 25.30% | 25.80% | 25.70% | 25.10% | 26.00% | 25.80% | 25.00% | 22.30% | -12.11% |
selling & admin exp | 21.20% | 19.60% | 21.00% | 21.90% | 23.50% | 23.20% | 23.70% | 22.60% | 22.60% | 23.60% | 10.17% |
operating profit(%sales) | 3.10% | 5.10% | 3.10% | 2.50% | 0.60% | -0.10% | 0.80% | 1.80% | 1.00% | -0.30% |
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Net income mlns) | $148 | $197 | $149 | $191 | $106 | -$89 | $62 | $140 | -$8 | -$320 | 146.25% |
Common size statement | 3.12% | 5.10% | 3.09% | 2.47% | 0.60% | -0.06% | 0.83% | 1.82% | 0.98% | -2.97% |
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1.58% | 1.86% | 1.42% | 1.99% | 1.06% | -0.91% | 0.59% | 1.21% | -0.06% | -2.72% |
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Balance sheet |
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Cash | 248 | 634 | 437 | 1248 | 885 | 783 | 1005 | 838 | 739 | 297 | 16.50% |
Inventory | 1292 | 1406 | 1411 | 1234 | 1410 | 1517 | 1460 | 1698 | 1637 | 1574 | 17.92% |
current asstes | 2053 | 2517 | 2354 | 3075 | 3103 | 2919 | 2686 | 2833 | 2844 | 2440 | 15.86% |
current liabilities | 882 | 1210 | 1066 | 1418 | 1280 | 1177 | 1264 | 1622 | 1714 | 1606 | 45.08% |
total assets | 3135 | 3537 | 3453 | 4133 | 3799 | 3633 | 3789 | 4069 | 4007 | 3746 | 16.31% |
longterm debt | 287 | 128 | 33 | 14 | 11 | 23 | 12 | 52 | 50 | 57 | -403.51% |
Equity | 1825 | 2055 | 2257 | 2560 | 2342 | 2224 | 2087 | 1955 | 1791 | 1503 | -21.42% |
common size statement | 7.91% | 17.92% | 12.66% | 30.20% | 23.30% | 21.55% | 26.52% | 20.59% | 18.44% | 7.93% |
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65.49% | 71.16% | 68.17% | 74.40% | 81.68% | 80.35% | 70.89% | 69.62% | 70.98% | 65.14% |
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28.13% | 34.21% | 30.87% | 34.31% | 33.69% | 32.40% | 33.36% | 39.86% | 42.78% | 42.87% |
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9.15% | 3.62% | 0.96% | 0.34% | 0.29% | 0.63% | 0.32% | 1.28% | 1.25% | 1.52% |
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