CarMax 2002 Annual Report Download - page 5

per Circuit City Group share, versus $149.2 million, or
73 cents per share, in fiscal 2001.
Improving for the Future. Our focus on customer service
is unrelenting.
Great service starts with great people. Customers will
largely rate their Circuit City experience based on their
interaction with our store Associates. In fiscal 2002, we
improved this interaction by:
●Completing the move of all sales training to a highly
interactive Web-based program that quickly and cost-
effectively delivers custom courses to sales counselors.
●Simplifying our sales counselor commission programs to
enable a greater focus on meeting customer needs, while
also improving sales counselor compensation.
●Reinstituting our floor manager program, assigning
one individual the responsibility of ensuring that each
customer’s needs are met in the store.
In fiscal 2003, we will:
●Adopt a sales counselor certification program to measure
core competencies in product knowledge and customer
service skills and establish minimum proficiency levels.
●Work to reduce sales counselor turnover, which will
reduce costs and help ensure that we have long-term,
well-trained sales counselors available for our customers.
●Focus on raising the skill level of our store manage-
ment team.
Sales growth will be driven by a combination of factors. In
addition to exceptional customer service, we believe that our
customers deserve a contemporary shopping environment
with a broad and competitively priced selection running the
gamut from the “latest and greatest” to more value-oriented
offerings. We are committed to upgrading and refreshing our
stores through remodeling and relocations.
We have conducted a number of remodel and merchan-
dising tests over the past two years. We will incorporate key
elements from these tests into our fiscal 2003 store plans
while also continuing to explore additional options going
forward. In fiscal 2003, we expect to:
●Introduce a leading-edge video department, with a dramati-
cally improved big-screen television display, to approxi-
mately 300 existing locations and to all new and relocating
stores. Big-screen televisions are one of our highest volume
and most profitable categories. The Consumer Electronics
Association projects that big-screen television sales will
grow at double-digit rates in calendar 2002, driven by
digital televisions and new display technologies such as
liquid-crystal and plasma. We believe this remodeled
department, combined with our strong customer service
orientation, will enable us to capture a disproportionate
share of big-screen television sales as well as growing sales
of related video products.
●Install full-store lighting upgrades in the majority of
these 300 stores to provide a brighter store environment.
●Relocate approximately 10 stores to more active sites
within their trade areas and continue our geographic
expansion, adding approximately 10 stores.
We expect to continue improving our customer offer
through remodels and relocations in fiscal 2004 and fiscal
2005, as well.
Our in-store efforts must be built around what con-
sumers want, and we must effectively tell consumers that
Circuit City will meet their needs. In fiscal 2002, extensive
consumer research improved our understanding of our core
customer and enabled us to develop a compelling, targeted
brand message. A new marketing program that encompasses
a variety of advertising vehicles, including newspaper
inserts, television, magazines, direct mail and interactive
media, told our core customers that we understand and
share their passion for consumer electronics. Efficiencies in
advertising buying and newspaper insert distribution
enabled us to explore the wider range of advertising vehi-
cles. In fiscal 2003, we will further refine our brand message,
test additional targeted advertising and step up our in-store
marketing efforts.
Lower sales and the need to update stores have con-
tributed to declines in our operating margin and our
return on assets. We are committed to improving these
numbers, although we acknowledge that short-term
improvements will be limited by remodeling and relocation
costs and incremental investments in advertising and man-
agement information systems. We expect remodeling and
relocation costs to reduce earnings per share by approxi-
mately 18 cents in fiscal 2003, compared with 6 cents in
fiscal 2002.
We believe our supply chain management initiatives
will help increase asset productivity. In fiscal 2002, a ven-
dor compliance program improved on-time delivery and
our cash conversion cycle. In fiscal 2003, we will continue
our supply chain initiatives, integrating our store and dis-
tribution center replenishment programs, adding direct-
to-store delivery in key categories where timely delivery is
critical and further improving inventory forecasting.
Leadership Advances. We continue to strengthen our
management team, both through internal promotion and
the addition of new executives with fresh perspectives. In
fiscal 2002, John Froman was promoted to executive vice
president and chief operating officer. A 16-year Circuit City
3CIRCUIT CITY STORES, INC. ANNUAL REPORT 2002