- The Washington Times - Monday, December 31, 2001

Electronics chain Circuit City is one of the few retailers weathering the recession fairly well.
The Richmond company hit its 52-week high the day after Christmas, closing at $26.65, while its 52-week low of $9.55 came on Sept. 17. It closed at $25.96 Friday.
The upswing stems from a smart move coming from the company's management, says Marie Driscoll, an analyst with Argus Research in Manhattan. About a year ago, Circuit City cut 1,000 jobs and closed eight distribution centers, stopped selling appliances, and expanded its inventory of computer office products and electronics.
Carmax, a car retailer partially owned by Circuit City Group, also saw its earnings triple.
"Changing their appearance is a positive thing," she says. "The management is capable and they seem to have gotten the worst behind them by exiting the appliance business."
David Campbell, an analyst with Davenport & Co. in Richmond, says that although the company's management style may have caused problems in the past, it is on the way to figuring a management style that works.
"Sometimes, they can be a bit more reactionary, looking back as opposed to looking ahead, but they are doing better than they had recently," he says. "They're marketing their products better, and it's starting to show in the numbers."
The figures are respectable, but Mr. Campbell says the company has been one of the many victims of the recession.
"It was trading at around $60 two years ago," he says.
Circuit City may be an unlikely benefactor from the September 11 terrorist attacks and the weak economy.
The company posted net income of $21.1 million (10 cents per share) on sales of $3.05 billion for the third quarter ended Nov. 30. The company posted losses of $64.4 million (32 cents) on sales of $2.89 billion a year earlier.
Home electronics is a growing category, with most sales being driven by the debut of such popular home video game systems as X-Box and Game Cube. Digital video discs (DVDs) and their players also sold well this year. These electronics flew off the shelves at Christmas, while sweaters and other garments piled up.
"Consumers are traveling less, freeing up their time and money," Mr. Campbell says.
Another trend the 632-store chain is able to capitalize on, says Ms. Driscoll, is that more people are deciding to work out of their homes. The chain is a large seller of home office products, such as computers and fax machines.
"Homes are getting bigger," she says. "There's just more room for stuff, and a lot of people are creating home offices out of their space."
Ms. Driscoll says that Circuit City knows it trails Best Buy in the home electronics retail category, but says the company could find its own niche to thrive in.
"Best Buy is bigger and it has lower prices," she says. "Maybe Circuit City will go for a more upscale customer base. I think they want to spruce up their stores and do more re-merchandizing."
But while Mr. Campbell's rating of the stock is at "buy," Ms. Driscoll is more cautious, rating Circuit City as a "hold."
"I had it as a 'sell' until last quarter," she says. "I think they're gaining some traction, but I want to see a few more quarters of sales before we raise the rating."

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