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2CIRCUIT CITY STORES, INC. 1999 ANNUAL REPORT
Fiscal 1999 was a significant year in the
progress of our businesses. Our Circuit
City stores began to see an industry
upturn driven by innovative digital video
and audio technologies, increased house-
hold penetration of wireless communica-
tions products, continued strength in
personal computers and steady growth in
major appliances. We are excited about our position in the industry as
we look forward to the new technologies that should support growth
well into the next decade. At CarMax, our used-car sales were chal-
lenged by a highly promotional new-car environment. Although our
locations are producing industry-leading volumes and we met specific
operating improvement objectives, the overall business did not meet
our sales or earnings expectations. In the coming year, we must build
from the consumer’s enthusiasm for the CarMax offer as we continue
refining our operations to improve financial performance. In the fall of
1998, Digital Video Express launched DVD players with the Divx fea-
ture and Divx movie discs nationwide. The Divx feature captured an
estimated 25 percent share of the DVD market during the holidays.
Added brand selections and continued growth in title availability will
make DVD players with the Divx feature an even more attractive
option for consumers in fiscal 2000.
As always, our Associates rose to the year’s challenges. Each of
our businesses faces unique competitive issues, but I believe that our
Associates are up to the task. I thank everyone for their efforts
throughout the year.
I also am pleased to acknowledge three senior management pro-
motions made during the year. Our chief financial officer, Mike
Chalifoux, was named an executive vice president. Mike joined Circuit
City as controller in 1983. He was elected vice president and CFO in
1988 and promoted to senior vice president in 1990. He was elected to
the board of directors in 1991 and added the title of corporate secre-
tary in 1993. Gary Mierenfeld was named senior vice president of dis-
tribution and service. Gary joined us as vice president for distribution
in 1993, bringing with him more than 23 years of retail experience.
Mike Froning was named president of Circuit City’s Southern division,
succeeding Mario Ramirez, who became president of the West Coast
division. Mike joined us in 1988 as a manager trainee and became a
store manager in 1989. He was named district manager in 1990 and
general manager in 1995. These promotions reflect the outstanding
leadership these individuals bring to our organization.
FINANCIAL RESULTS
Circuit City Stores, Inc. For the fiscal year ended February 28, 1999,
Circuit City Stores, Inc. total sales rose 22 percent to $10.80 billion
from $8.87 billion in fiscal 1998; net earnings were $142.9 million
compared with $104.3 million.
Circuit City Group. For the Circuit City Group, total sales rose 17
percent to $9.34 billion from $8.00 billion in fiscal year 1998, and com-
parable store sales increased 8 percent. Earnings for the Circuit City
business increased 48 percent in fiscal 1999 to $235.0 million from
$159.2 million. Circuit City contributed $2.34 per share to the Circuit
City Group’s earnings, an increase of 46 percent from $1.60 per share in
fiscal 1998. Including the impact from Divx and CarMax, net earnings
for the Group were $148.4 million, or $1.48 per share, in fiscal 1999,
versus $112.1 million, or $1.13 per share, in fiscal 1998.
CarMax Group. CarMax Group total sales rose 68 percent to $1.47
billion from $874.2 million; comparable store sales decreased 2 per-
cent; and the net loss was $23.5 million compared with $34.2 million
in fiscal 1998. The fiscal 1998 net loss includes $7.0 million related to
a write-down of assets. In fiscal 1999, the net loss attributed to the
CarMax Group stock was $5.5 million, or 24 cents per share, com-
pared with $7.8 million, or 35 cents per share, in fiscal 1998.
CIRCUIT CITY REVIEW
In fiscal 1999, the consumer electronics industry emerged from an
extended period when the majority of sales were generated by prod-
ucts well along in their life cycles. In the absence of significant prod-
uct introductions, numerous regional retailers, including many who
had tried to copy our high-service offer, closed their doors. Today, our
principal competitors are large specialty, discount or warehouse
retailers with generally lower levels of service. These are intense
competitors. But, as we now look towards an upturn driven by more
complex digital technologies, we are pleased that Circuit City is the
only consumer electronics specialty retailer with a nationwide pres-
ence and a long history of customer service.
CHAIRMAN’S LETTER