On the heels of the strong earnings announcement,Circuit City's turnaround man, chairman and CEO W.Alan McCollough said that he would retire. He namedheir apparent Philip J. Schoonover as his successorCEO, effective March 1, 2006. Schoonover, a formerBest Buy executive, joined Circuit City in 2004.
McCollough's decision surprised many analysts who saidthat Schoonover's challenge will be to keep the chainon the right track now that McCollough has it headedin the right direction. During the company's earningsconference call, McCollough said that the chain"continued to gain traction" during the third quarter,but still had a lot of work ahead of it – a statementthat analysts second.
During the quarter, Circuit City achieved net earningsof $10.1 million compared to a loss of $5.9 millionfor the same period last year and a profit of sixcents per share compared to a loss of three cents pershare for the third quarter 2004. Analysts surveyed byThomson Financial expected the company to earn fourcents a share in the quarter.
McCollough attributed the sales to increases in closerate and average ticket, as well as strength intelevisions, portable digital audio products, notebookcomputers and digital imaging products. Specifically,both notebook computers and music software posteddouble digit comp sales growth, according to a companystatement.
The company's expenses increased during the thirdquarter as it spent $16 million more on advertising tocapture more share of the market and invested in storeopenings and relocations. During the quarter, CircuitCity relocated four Superstores and opened ten newSuperstores, bringing the total to 625 Superstores andsix other locations in the U.S. and 954 retail storesand dealer outlets in Canada.
Next quarter, the chain plans to open three new storesand relocate one store. And, looking to fiscal 2007,the chain expects to increase the pace of new andrelocated store openings – many of which will be inthe new 20,000-sf store format.
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