Circuit City 2009 Annual Report Download - page 29

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Table of Contents
GEOGRAPHIES:
North American sales increased 10.8% to $2.3 billion compared to 2008. North American sales benefited from increased retail and internet sales
in the consumer channel, opening 5 retail stores and the Circuit City acquisition, which contributed $67.3 million of sales offset by the declining
sales in the Industrial products segment. On a constant currency basis, translating 2009 Other North America results at 2008 exchange rates,
North American sales would have grown to 11.6%. The movement in the exchange rates negatively impacted sales by approximately $17.3
million. Adjusting for the impact of the number of weeks, North American sales increased 13.1%.
European technology products sales declined 9.8% to $848.5 million. On a constant currency basis, European sales would have increased 1.2%.
Sales attributable to the WStore acquisition totaled approximately $63.8 million for the year. Movement in foreign exchange rates accounted for
$103.6 million of the sales decline in Europe for the year. The trend of declining sales in Europe is expected to reverse as global economic
conditions improve and as a result of the WStore acquisition.
Worldwide consumer-channel revenue, defined as revenues from retail stores, consumer websites, inbound call centers and, shopping channels,
were $1.8 billion compared to $1.6 billion in the same period in 2008, an increase of 12.2%. Growth was driven primarily by volume increases
in computers, including laptops and netbooks and consumer electronics, including televisions. Worldwide business to business channel sales
were $1.3 billion for 2009 compared to $1.4 billion in the prior year, a 4.9% decrease. Worldwide business to business sales declined as the
result of the global economic slowdown. The acquisition of WStore in September 2009 partially offset the decline.
2008 vs. 2007:
Sales increased in all reporting business segments and in both geographies during 2008 over 2007. The growth in Technology Products sales
increase was driven by increased internet and retail store sales as the result of the acquisition of the CompUSA. The growth in Industrial
Products sales resulted from the Company increasing its market share through aggressive acquisition of customers via web and catalog
advertising. Sales attributable to CompUSA web and retail were $226.3 million for the year. In Europe sales increased .9% compared to 2007.
Movements in foreign exchange rates positively impacted the European sales comparison by approximately $13 million for the year. Excluding
exchange rate benefits, European sales would have been flat year over year. Sales in Canada (Other North America) increased by 13.9%
compared to the prior year. Excluding exchange rate benefits, sales would have increased 10.9% for the year. As in the United States, sales
slowed in the second half of 2008 in Europe and Canada for both consumer and business to business sales as the result of a slowdown in
economic activity. Sales in the Software Solutions segment were not material in 2008 and 2007. The Company reorganized this segment in the
fourth quarter of 2008 which resulted in a charge to earnings of approximately $1.7 million.
GROSS MARGIN
Consolidated gross margin declined in 2009.as the Company lowered certain product prices and offered freight incentives in order to maintain
and grow market share and to respond to competitive pricing pressures that started in 2008. Additionally, consolidated gross margin has been
impacted by a shift in mix, as higher margin Industrial Products accounted for a smaller percentage of consolidated revenues than in previous
years. Gross margin is dependent on variables such as product mix, vendor price protection and other sales incentives, competition, pricing
strategy, cooperative advertising funds required to be classified as a reduction to cost of sales, freight discounting and other variables, any or all
of which may result in fluctuations in gross margin.
Consolidated gross margin declined during 2008 over 2007 due primarily to competitive pricing pressures in the Technology Products segment.
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