- The Washington Times - Wednesday, July 26, 2000

Circuit City Stores Inc. is changing its look and its merchandise selection.

The Richmond-based consumer electronics retailer plans to close eight distribution centers and cut 1,000 jobs as it revamps its existing stores and gets out of appliance sales.

The retailer, which has struggled in the appliance category, will focus on expanded selections of consumer electronics and home office products.

"Circuit City should have never been in the appliance business in the first place because too many people sell appliances," said Frederic Russell, president of Frederic E. Russell Investment Management in Tulsa, Okla. "The market for personal computers and wireless phones is so large they don't need to distract themselves."

The company will rearrange its 573 Superstores during the next three months to replace the washers and dryers with an expanded selection of personal computers, digital cameras, games and computer software. The company will spend $2.5 million to revamp each store over the next three years.

"Continued strength of the consumer electronics and home office categories and the recent substantial weakness in appliances accelerated our decision to reformat all existing superstores," said W. Alan McCollough, president and chief executive officer of Circuit City, in a statement.

As a result of discontinuing the appliance business, Circuit City will close six distribution centers by the end of this year and two more by the middle of next year. The company is wiping out about 1.7 percent of its work force with the closings.

The distribution centers are in Brandywine; Atlanta, Chehalis, Wash.; Chicago, Columbus, Ohio, Dallas; Des Moines, Iowa; and Fort Lauderdale, Fla.

Last year, appliances represented less than 14 percent of overall sales and profitability was below average. Sales of TVs, VCRs, camcorders, audio merchandise and home office products accounted most of the rest.

"The major appliance business carries high fixed costs and tends to be more cyclical than other retail categories," Mr. McCollough said.

Circuit City's same-store sales in consumer electronics and home office categories have increased while appliances have remained negative.

As a result in the company's declining appliance sales, Circuit City expects fiscal second-quarter earnings of 32 cents, down from 35 cents from the same period last year.

"Appliances are the short-term reason, but the real reason for the problem is an aging store base they haven't remodeled and a nimble competitor in Best Buy," said John Glass, an analyst at Deutsche Banc Alex. Brown.

Best Buy is the largest retailer of consumer electronics with sales of $12.4 billion for the fiscal year ending February 2000.

Circuit City's stock dropped 20 percent yesterday hitting a six-month low of $26.25 on the New York Stock Exchange.

Circuit City also operates 43 Circuit City Express Stores, which are located in malls and has a majority stake in CarMax, a chain of new and used car dealerships.

• This article is based in part on wire service reports.

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