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  1. 1. CIRCUIT CITY STORES, INC. ANNUAL REPORT 2000 Circuit City MAKING IT EASIER.
  2. 2. Making it easier. Easier to learn about new technologies through knowledgeable sales help and effective displays. Easier to find the real price of a car through low, no-haggle prices. Easier to buy any way the consumer wants to buy—in our stores and online. Serving the consumer by making it easier. THE CIRCUIT CITY STORES, INC. COMMON STOCK SERIES INCLUDE: Circuit City Group Common Stock (NYSE: CC). Circuit City is a leading national retailer of brand-name consumer electronics, personal computers, major appliances and enter- tainment software. At the end of fiscal year 2000, the Circuit City business included 571 Superstores in 155 markets and 45 Circuit City Express mall stores. The Circuit City Group also includes a retained interest in the equity value of the CarMax Group. The Circuit City Group includes Digital Video Express, which is now classified as a discontinued operation for financial reporting purposes. CarMax Group Common Stock (NYSE: KMX). As the pioneer of the used-car superstore concept, CarMax is transforming automobile retailing with a friendly offer that delivers low, no-haggle prices, a broad selection and high-quality customer service. At the end of fiscal year 2000, CarMax operated 40 locations, including 34 used-car superstores and 20 new-car franchises. IN THIS REPORT, WE USE THE FOLLOWING TERMS AND DEFINITIONS: Circuit City Stores and Circuit City Stores, Inc. refer to the corporation, which includes the Circuit City retail stores and related operations, the CarMax retail stores and related operations, and the company’s interest in Digital Video Express, which is classified as a discontinued operation. Circuit City refers to the retail operations bearing the Circuit City name and to all related operations such as product service and its finance operation. Circuit City Group refers to the Circuit City and Circuit City-related operations, the retained interest in the equity value of the CarMax Group and the company’s interest in Digital Video Express, which is classified as a discontinued operation. CarMax Group and CarMax refer to retail locations bearing the CarMax name and to all related operations such as its finance operation. FO R WA R D - LO O K I N G S TAT E M E N T S : This report contains forward-looking statements, which are subject to risks and uncertainties, including, but not limited to, risks associated with the development of new business concepts. Additional discussion of factors that could cause actual results to differ materially from management’s projections, forecasts, estimates and expectations is contained in the company’s SEC filings, including the Circuit City Stores, Inc.“Management’s Discussion and Analysis” contained in this annual report.
  3. 3. FINANCIAL HIGHLIGHTS Years Ended February 29 or 28 2000 1999 1998 (Dollar amounts in thousands except per share data) CIRCUIT CITY STORES, INC. Net Sales and Operating Revenues .......................................................................... $10,810,468 $8,870,797 $12,614,390 Earnings from Continuing Operations.................................................................... $ 211,470 $ 124,947 $ 327,830 Total Assets .............................................................................................................. $ 3,445,266 $3,231,701 $ 3,955,348 Total Stockholders’ Equity........................................................................................ $ 1,905,130 $1,730,039 $ 2,142,174 Working Capital....................................................................................................... $ 1,430,710 $1,240,523 $ 1,536,456 CIRCUIT CITY GROUP Net Sales and Operating Revenues .......................................................................... $ 9,344,170 $7,996,591 $10,599,406 Earnings from Continuing Operations Before Inter-Group Interest in the CarMax Group............................................................................. $ 234,984 $ 159,170 $ 326,712 Earnings from Continuing Operations.................................................................... $ 216,927 $ 132,710 $ 327,574 Earnings per Share from Continuing Operations: Basic................................................................................................................... $ 1.09 $ 0.68 $ 1.63 Diluted................................................................................................................ $ 1.08 $ 0.67 $ 1.60 Number of Circuit City Superstores......................................................................... 537 500 571 CARMAX GROUP Net Sales and Operating Revenues........................................................................... $ 1,466,298 $ 874,206 $ 2,014,984 Net Earnings (Loss)................................................................................................. $ (23,514) $ (34,223) $ 1,118 Net Earnings (Loss) per Share: Basic................................................................................................................... $ (0.24) $ (0.35) $ 0.01 Diluted................................................................................................................ $ (0.24) $ (0.35) $ 0.01 Number of CarMax Stores........................................................................................ 31 18 40 All Circuit City Group earnings per share calculations have been adjusted to reflect a two-for-one stock split effective June 30, 1999. On June 16, 1999, Digital Video Express announced that it would discontinue operations. Results of continuing operations of Circuit City Stores, Inc. and Circuit City Group shown in the tables above exclude Digital Video Express. See notes to consolidated and group financial statements. 1 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  4. 4. CHAIRMAN’S LETTER In fiscal 2000, we began to see the exciting potential that the digital product cycle brings to our Circuit City business. At CarMax, we produced marked operating improvement in our core business—the used-car superstores. RICHARD L. SHARP growth was minimal, our financial resources I am pleased to report that fiscal 2000 produced CIRCUIT CITY: MAXIMIZING AN allowed us to continue our geographic expansion the most successful year ever for our Circuit ENORMOUS SALES OPPORTUNITY For Circuit City,the promise of the digital product and maintain our commitment to outstanding City business and meaningful progress for our cycle is becoming reality as new technologies customer service. As a result, we entered this CarMax auto superstores. continue to drive industry growth. This cycle is new period as the only specialty retailer in our Circuit City Stores, Inc. reported consolidated dominated by feature-rich products that offer categories with a well-trained and knowledge- sales growth of 17 percent,reaching $12.61 billion new and often complicated functionality for the able sales force and a nationwide presence. Our in total sales. Earnings from continuing opera- consumer—an ideal fit for our high-service store investments in sales training have yielded an tions rose 55 percent to $327.8 million. format. We believe this new product cycle can outstanding training program, which we will In our Circuit City business, total sales grew last throughout the decade. We are also enjoying improve even further with programs to be 13 percent to $10.60 billion, comparable store sales strength in more traditional products, as delivered via the Internet. Our long history of sales increased 8 percent and earnings rose evidenced by a record year for VCR unit sales. successful consumer electronics product intro- 39 percent to $326.7 million. CarMax produced As we enter the new decade, we are focused on ductions and our national store base enabled total sales of $2.01 billion, a 37 percent maximizing the sales of new and existing prod- us to establish alliances with America Online, increase, while comparable store sales rose ucts in our Circuit City Superstores. Inc., the world’s leading interactive services 2 percent. CarMax exceeded the financial goals company, and Sony Electronics Inc., the In fiscal 2000, personal computers remained we established at the beginning of the year, world’s leading consumer electronics company, our strongest product category, reflecting producing a profit of $1.1 million compared to introduce their latest technologies beginning continued increases in household penetration, with a net loss of $23.5 million in fiscal 1999. in fiscal 2001. higher consumer use of the Internet and new Yet, the year was not without disappointments. capabilities such as digital imaging and record- In fiscal 2000,we undertook significant initiatives In June, we discontinued Digital Video Express. ing. We saw high demand for related products, to make it even easier for consumers to shop at Although this innovative system for watching including digital still cameras, digital cam- Circuit City. We became the first national brick- movies was adopted enthusiastically by corders and MP3 audio products. In the and-mortar specialty retailer to sell consumer consumers, Divx did not obtain the studio consumer electronics categories, our DVD electronics on the Internet. We also enhanced support necessary for long-term success. player sales rose rapidly, DIRECTV and wire- our Superstore design to help ensure that we Consolidated and Circuit City Group net earn- less communications maintained their high are maximizing the sales opportunity in all ings for fiscal 2000 include after-tax losses of growth rates and big-screen television sales areas, adding displays for digital televisions, $16.2 million from the discontinued Divx remained healthy. In the fall, we introduced digital imaging and broadband Internet access. operations and $114.0 million on the disposal the first digital televisions in our stores. In all stores opened during the fall, we signifi- of the Divx business. cantly expanded the number of products that Circuit City is poised for continued success in consumers can select and take directly to the this exciting industry cycle. When industry cash register, if they choose. 2 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  5. 5. CIRCUIT CITY STORES, INC. also have proven to be strong traffic drivers for merchandising,Alan gained extensive experience In fiscal 2001, we will add or improve displays new-car franchises. in the two principal operating components of our for the newer technologies in all stores nation- business—store operations and merchandising. wide. These improvements will help ensure In south Florida, Texas and Chicago, we believe that we are in the best position to capture the He was named to his present position in March that we can further improve our results with sales opportunity presented by the digital cycle. 1997. Alan’s experience,his intense commitment increased consumer awareness and additional We also will remodel 30 to 35 stores in central to customer service and the support he engen- satellite stores, including two prototype stores and south Florida and in Richmond,Va., pro- ders among our Associates and our vendors will opened late in fiscal 2000. We also are seeking viding easier access to self-service products help him to ensure that the company maximizes appropriate opportunities to integrate new-car and expanding our assortments in key areas. the exciting opportunities ahead. franchises with existing used-car superstores. Other management changes include the pro- CARMAX: A STEADY FOCUS AND CarMax is aggressively leveraging the opportu- motion last summer of Philip Dunn to senior STEADY PROGRESS nities of the Internet. At the end of fiscal 2000, vice president. Phil joined Circuit City in 1984. At CarMax,we slowed geographic growth in fiscal we introduced a redesigned CarMax Web site He was named treasurer in 1991, was promoted 2000 to concentrate on improving operations and that provides online access to all the vehicle to vice president in 1992 and added the title of profitability. With comparable store sales growth information available at our stores. Consistent controller in 1996. in our used-car business at year-end, our first with our commitment to service, carmax.com annual profit and a strong finish, we surpassed offers dedicated Internet sales consultants for As I conclude fiscal 2000 and my tenure as chief our financial goals for the year. The marked customers who want to buy online. Recognizing executive officer of Circuit City Stores, I believe operating improvement is particularly signifi- that consumers use a variety of well-known that the company is well positioned for the cant because it came from our core used-car Internet resources to research purchases, future. By focusing on the consumer and devel- superstores, including those with integrated CarMax also is testing relationships with the oping a truly outstanding team of Associates, we new-car franchises. The improvement reflects: leading automotive sites. These services can be have built a company with the financial strength • ongoing productivity improvements in sales nationwide mechanisms for building CarMax’s to perform extraordinarily well in good times and operations; consumer awareness. and to more than weather the down cycles. Our • better results from the profit improvement Circuit City and CarMax Associates are talented In fiscal 2001, we will focus on growing sales in plan initiated at the end of fiscal 1998; and enthusiastic. I would like to express my existing markets. Significant opportunities • our hub and satellite operating strategy; deepest appreciation to them and their families, remain in these markets, and we believe that a • the continued integration of new-car fran- our shareholders, our vendors and our customers continued focus on maximizing these opportu- chises with our used-car superstores; and, for their support. nities should yield solid profitability for CarMax. • the exit of a significant competitor from the Sincerely, used-car superstore business. LEADERSHIP CHANGES In December, we announced a succession plan As we enter fiscal 2001, we continue to devote as we prepared for me to leave the day-to-day our energies to our existing markets. Transforming operations of the company. Effective in June 2000, the car-buying experience to make it dramatically Richard L. Sharp Alan McCollough, currently president and chief easier for the consumer remains the cornerstone Chairman and Chief Executive Officer operating officer, will add the title of chief execu- of the CarMax concept. CarMax locations in Circuit City Stores, Inc. tive officer. In his expanded role,Alan will lead single-store markets and in the Atlanta and April 6, 2000 our Circuit City and CarMax businesses. Alan is a Washington/Baltimore multi-store markets are 12-year Circuit City veteran. As general manager producing outstanding results consistent with of corporate operations,president of our central their history and our initial expectations for operating division and senior vice president of the CarMax concept. Our used-car locations 3 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  6. 6. PRESIDENT’S LETTER The new digital cycle with its full-featured, often complex, technologies creates an ideal opportunity for Circuit City. A long history of sales training, a national store base and alliances with industry-leading vendors will help position us at the forefront of this cycle. W. ALAN MCCOLLOUGH cable modems provide Internet access up to 50 Fiscal 2000 was the second full year DVD players Our company is entering an exciting period. times faster than the standard telephone modem. were available. With attractive entry prices as At Circuit City, the focus is on the future. We are Similar capabilities using telephone-based digital low as $159, the industry sold three times as entering the new decade in a strong financial subscriber lines are now available, and we expect many units in calendar 1999 as in 1998. As we position,with a long heritage of customer service broadband access via satellite in the near future. introduce more brands and features, such as and a continuing commitment to knowledgeable Once again,our customers will be faced with multi-disc changers that allow a single unit to sales assistance. We will build on this foundation, multiple digital product and service options, and serve as both a primary CD player and DVD introducing consumers to new products with our professional sales Associates will be available player,consumer appeal will expand significantly. new capabilities and revamping our merchandise to assist. DIRECTV sales continue rapid growth with presentations to display, explain and sell a full In fiscal 2000, personal computers remained our household penetration of direct broadcast range of products and services. I am particularly strongest major category despite difficult year- satellite signals still at only 13 percent. Access pleased to face the future with talented Associates over-year comparisons and continued erosion in to local stations, high-definition programming whose number one goal is providing consumers average retail prices. Advances in technology— and built-in features such as personal video the best possible shopping experience. recording technology and Internet access are PIII, digital imaging, voice recognition, digital C I R C U I T C I T Y : T H E D I G I TA L AG E further increasing the functionality of DIRECTV audio recording, to name a few—reinforce our Fiscal 2000 marked the real beginning of what and should contribute to continued strong belief that the home office category will provide I believe will be the most exciting time ever sales growth. further sales and profit increases in fiscal 2001. for Circuit City. Amazing new applications of Like DIRECTV, wireless communications digital technology had a positive impact on With advances in technology, digital audio exemplifies the marriage between hardware products throughout our stores, opening up recording capability is available in both the capability and service offerings. The consumer’s new possibilities for consumers. And, I believe consumer electronics and personal computer choices have exploded and now include numerous the best is yet to come. categories. Audio CD recorders allow consumers analog and digital options. Many rate plans to customize CD recordings for personal enjoy- Last fall, consumers saw for the first time and packages offer long-distance service and ment. With a computer and Internet access, the extraordinary picture delivered by digital Internet access. With penetration at only about consumers can download compressed music televisions, and demand quickly exceeded the 30 percent, the growth opportunity in wireless for playback on a portable MP3 player. limited industry supply. As digital content remains enormous. increases and pricing becomes more attractive, In major appliances, we are seeing significant Still in its infancy, broadband Internet access is we anticipate growing demand for both 4:3 technological and competitive changes. another product and service combination that and 16:9 wide-screen sets. Development of Technology is creating ovens that cook faster; offers new capabilities. In fiscal 2000,Circuit City display technologies such as plasma and liquid front-loading, super-efficient washers; and became one of the nation’s first retailers to sell crystal hybrids add to the industry’s television refrigerators with digitally controlled temperature CableLabs-certified DOCSIS modems. These sales potential. zones. Our sales remained healthy throughout 4 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  7. 7. CIRCUIT CITY directly accessible by the customer in these areas. We are exceptionally pleased with our e-commerce fiscal 2000, and we will test a new store concept Yet even for the most basic products, help is avail- performance, especially during our first high- that may help us build an even more distinctive able for customers who want it. This year, we will traffic holiday season. And, we continue to consumer offer in the coming decade. further expand self-service areas in all our new enhance the site. Beginning in April, all sales CIRCUIT CITY: MAKING IT EASIER and remodeled stores. counselors were able to access our Web store The products are exciting; the opportunity is inventory from any point-of-sale terminal, and We will concentrate our fiscal 2001 full remodels enormous. But, this explosion of new products, customers were able to conveniently access our in central and south Florida and in Richmond, services and functionality can be confusing, and site via our premiere position on AOL’s Shop@ Va. The Superstores in these markets will be consumers will not tolerate confusion. Our job locations. While no one can be certain what dedicated to consumer electronics and personal is to unravel the complexities of the developing industry Web sales may be, we are committed computers, creating a high-energy environment technology. We start with our longstanding to providing this option to our customers and for new technologies and permitting expanded commitment to customer service and a knowl- to being the best on the Web in our categories. assortments of video game hardware and soft- edgeable sales team. In addition, we are intro- ware, entertainment and computer software, I look forward to the expanding opportunities ducing powerful store displays that we believe peripherals and accessories. All Superstores in our Circuit City business and to working will maximize sales across all product lines. opened after the first fiscal quarter will follow with the exceptional management team and all In fiscal 2001, our planned 25 new stores and this exciting consumer electronics design. In our Associates who can realize Circuit City’s all 571 existing Superstores will feature displays addition, in the remodel markets, we will test a full potential. designed to highlight the latest advances in new selling strategy for appliances. In these technology. These displays will include AOL OUTSTANDING PROGRES S markets, we will open a limited number of Internet Centers, part of our strategic alliance AT CA R M A X stand-alone major appliance stores, which we with America Online, Inc.; a Sony Memory I also am energized by our opportunities at believe will increase consumer awareness of our Stick Interactive Universe to introduce this CarMax. Austin Ligon and the CarMax appliance selection and provide an improved portable digital memory device that extends Associates have made enormous strides as we selling environment for these products. across a family of products; significantly have continued to revolutionize the auto indus- expanded displays highlighting the latest in try. In a tough, competitive environment, they E-COMMERCE digital audio recording technology; redesigned Consistent with our commitment to sell the way exceeded their financial goals in fiscal 2000, wireless phone displays that help consumers customers want to buy, in fiscal 2000, we became producing a profit for the year. Austin outlines compare products, features and services; the first national brick-and-mortar specialty CarMax’s fiscal 2000 accomplishments and enhanced DVD, DIRECTV and personal video retailer to sell consumer electronics over the objectives for the coming year in his letter. recording areas to more prominently emphasize Internet. Unlike many competitors, we have I thank all our Associates as we enter this the latest video technology; and an expanded tightly integrated our e-Superstore,circuitcity.com, new decade and focus on building value for digital television display to accommodate DTV’s with our brick-and-mortar locations. shareholders in both the Circuit City and rapidly growing assortment. We are delivering a combination of in-depth CarMax businesses. Even as we make it easier for consumers to product comparison information, broad product Sincerely, understand what these complex new products selection and convenient purchase and delivery and services can do for them, we recognize that options, including immediate in-store pickup. some customers require less help with more Approximately 50 percent of our Internet familiar products. During the second half of shoppers choose the convenience of in-store W. Alan McCollough President and Chief Operating Officer fiscal 2000, we added self-service displays to our pickup for products available in the store and Circuit City Stores,Inc. new stores. Telephony products, software,VCRs, on the Web. April 6, 2000 portable audio products and accessories are 5 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  8. 8. CARMAX PRESIDENT’S LETTER In fiscal 2000, CarMax made great strides in improving our operations and better understanding all aspects of the automotive market. In fiscal 2001, we will focus on solidifying this foundation in our existing markets. W. AUSTIN LIGON While CarMax has continued to improve sales I am happy to report that CarMax exceeded its competitor who had committed to high-square- and profitability, our major used-car superstore fiscal 2000 objectives. In February 1999, we footage,high-acreage locations. We moved too competitor was less successful with their effort announced plans to slow our rapid geographic quickly, and the pace of our growth resulted in to copy our store format. Our competitor exited growth so that we could concentrate on improving 10 significantly overbuilt stores. the used-car superstore business completely at profitability in under-performing markets and At CarMax, we now know that most of our the end of calendar 1999. We believe their exit is continue building on an already successful multi-store markets need more, but smaller, already improving sales by eliminating consumer foundation in other markets. In fiscal 2000, stores to properly serve their trade areas. We confusion over our competing store formats with a balanced focus on adding revenues and have adopted a hub and satellite strategy that and allowing CarMax to clearly emerge as the improving margins, we: is improving performance in Miami, Tampa, successful used-car superstore standard. • increased our vehicle unit, service and Houston, Dallas and Chicago. In these markets, accessory sales; we have converted a total of six CarMax CONSUMER ENTHUSIASM • increased our financing and extended warranty superstores to satellite operations that share The opportunities afforded by making it easier sales; and, reconditioning, purchasing and business office and more fun for consumers at every step of the • implemented productivity enhancements functions with a nearby hub store. While the car-buying process are what led us into the that improved efficiency and reduced costs. satellite store presents exactly the same offer to business. Our experience convinces us that These accomplishments improved our pretax the consumer, its annual operating costs are CarMax continues to offer the best shopping operating results by more than $40 million, much lower, significantly improving the prof- experience for the automotive consumer. bringing us to a profitable position for the year. itability in these multi-store markets. CarMax’s success in single-store markets and in We believe our improved operating results and the metropolitan multi-store markets of Atlanta, The satellite prototype calls for a display capacity continued changes in the competitive land- Washington and Baltimore and the rising volumes of 250 to 400 vehicles on a four- to six-acre site. scape set the foundation for solid profitability in our other metro markets is clear evidence of A 12,000- to 14,000-square-foot building houses in fiscal 2001. consumers’ enthusiasm for the CarMax offer. sales offices, a showroom and four to seven CarMax used-car superstores are the highest service bays for regular maintenance and warranty EXPANSION HISTORY volume auto retailing locations in the industry. service. In the first quarter of fiscal 2000,we grand- When we initiated our aggressive national While the average new-car dealer sells 1,150 opened a prototype satellite superstore, in expansion plan in June 1996, we had just new and used vehicles per year, the average Rockville, Md., enhancing the performance achieved impressive results in our Norcross, CarMax superstore sells more than 4,100 used of the already strong Washington/Baltimore Ga., superstore—the largest store we had open vehicles alone per year. Our Laurel, Md., super- market. In addition, at the end of fiscal 2000, we at that time. We believed that this store model store produces the largest used-car sales volume constructed two prototype satellite stores, one in would be equally successful in other major metro- in the nation, with used-car sales 20 times the Dallas and one in Houston. politan markets. We also were racing to gain used-car sales of the average dealer. first-entry advantage over another superstore 6 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  9. 9. CARMAX of doing business with CarMax. We know that it was producing 10 percent of our new-car Market research further validates that CarMax CarMax store sales are directly correlated with sales transactions. customers like our unique approach. Ninety the number of consumer store visits. If we percent of customers are satisfied with their In fiscal 2000, CarMax made great strides in increase awareness and visits, we increase sales CarMax experience and would recommend laying the groundwork for sustaining profitable and profits. CarMax to family and friends. growth. In fiscal 2001, our focus will remain on In fiscal 2000, to increase consumer awareness solidifying this foundation and securing our We also are achieving success when we extend in our markets, we launched a new television role as the nation’s leading specialty used-car the ease of the CarMax buying process to new advertising campaign focused on the key rea- retailer as well as a growing retailer of new cars. We are uniformly successful in the sale of sons to shop at CarMax: cars. We plan to concentrate on our hub and new cars when our franchises are integrated or • Low prices satellite strategy in existing markets and to co-located with CarMax used-car superstores. • No haggling take advantage of appropriate opportunities Within their first year of operation, our inte- • Hassle-free financing to integrate or co-locate new-car franchises grated new-car franchises ranked among • Broad selection with existing used-car superstores. We believe the leading locations for their brands in the • Certified high quality this continued emphasis on revenue growth markets they serve, and half are number one. • On-site maintenance and repair service and operating margin enhancement will Our Norcross, Ga., store in the Atlanta market • Online prices and daily inventory updates deliver solid profitability in fiscal 2001 and remains the number one Chrysler-Plymouth allow us to resume moderate and profitable dealer in the U.S. and has received the Five Star CARMAX ONLINE geographic growth thereafter. rating, DaimlerChrysler’s highest honor for cus- At the end of fiscal 2000, we continued to tomer service excellence, for two years in a row. I want to thank our CarMax Associates for all the enhance CarMax’s uniquely natural Internet hard work that made possible the extraordinary We have been disappointed, however, with the integration. Since 1997, carmax.com has progress in fiscal 2000. Their continuing, enthu- performance of our stand-alone new-car fran- allowed consumers to search CarMax’s entire siastic commitment to The CarMax Way is chises. Although their volumes have improved 10,000 new- and used-car inventory, which is critical to our success. significantly versus their levels prior to acquisi- updated daily, and see the price and basic tion, sales remain below our expectations. We description of each vehicle. With the enhance- Sincerely, are actively pursuing opportunities to integrate ments, they now also can compare any new or or co-locate as many of these franchises with used vehicles side-by-side, see photographs of our used-car operations as possible. In January, each vehicle, compare pricing of used cars we moved our Laurel, Md., Toyota franchise to a with Kelley Blue Book prices, see the MSRP W. Austin Ligon site adjacent to the CarMax Auto Superstore in and manufacturer’s invoice price for new cars, President Laurel. The new Laurel Toyota location is the and estimate monthly payments. Earlier in the CarMax first facility CarMax has built exclusively to year, we launched our Insta-PriceSM Online April 6, 2000 sell new cars. The move already has begun to New-Car Buying Service, the first online ser- generate dramatically higher sales volumes. vice to offer firm prices on all new vehicles. In addition, we began testing alliances with With the popularity of the CarMax offer proven popular online automotive sites that refer among CarMax customers, our challenge is to consumers to carmax.com. Our online buying increase consumer awareness, exposing more service is staffed by dedicated Internet sales consumers to The CarMax Way so that they consultants, and by the end of the fiscal year, fully understand and appreciate the benefits 7 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  10. 10. Making it easier to the benefits of new
  11. 11. understand and enjoy technology. At Circuit City, we are making it easier for consumers to under- stand and add new consumer electronics and personal com- puting technologies to their lives. Knowledgeable sales assistance, compelling product and technol- ogy demonstrations and in-store informational displays help explain the amazing products and services emerging in today’s exciting environment of digital advances. And, we are offering consumers new ways to shop, with an expanded assortment of self-service products in many stores and a Web site that is fully integrated with our Superstores nationwide.
  12. 12. Consumers are rapidly embracing the high quality and flexibility of digital camcorders. New video game platforms and digital audio recording products such as MP3 offer sales growth opportunities. Consumers can see the amazing picture quality of digital television at side-by-side displays. At Circuit City, consumers experience Circuit City’s AOL Internet technology with Centers demonstrate how the Internet becomes a part of everyday life through interactive displays. multiple connecting options. 10 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  13. 13. CIRCUIT CITY Circuit City is bringing the digital product revolution to consumers. We believe the result will be a strong, long-term growth cycle for shareholders. Information. Given selection and attractive Broad selection allows consumers to choose the Circuit City has long led the way in sales of prices, the key to making shopping easier is products and services that fit their particular cutting-edge consumer electronics technologies. making it easy for consumers to get product circumstances. Within each product line, our As the swift pace of technological advances information. We provide that information buyers provide an array of brands, products adds complex products and services to our through a well-trained, knowledgeable sales and services that range from the most basic to selection, Circuit City is making it easier for force and displays that allow hands-on product the most feature-rich. We also introduce new consumers to understand, purchase and incor- demonstrations. technologies early in their cycle. We were one porate the benefits of these technologies into of the first retailers, and are today the nation’s their lives. We achieve this objective by offering To assure that Circuit City sales counselors are leading retailer, of DIRECTV. a full spectrum of merchandise, competitive up to date with the newest product information, prices and clear, but comprehensive, product we emphasize continuous learning that covers Price. To meet our growth goals, Circuit City information. Finally, we give consumers the product and service technologies, customer must remain price-competitive. The American ability to shop the way they want to shop— service and store operations. In fiscal 2001, we retail environment caters to a value-conscious either in our stores or through the dynamic will begin to introduce state-of-the-art interac- consumer. In addition to comparing prices new medium, the Internet. tive Web-based training for store, service center across brick-and-mortar retailers, consumers and distribution Associates. By maintaining now can compare prices across a growing IN THE STORE and delivering training programs on the Web, number of Internet retailers. The competitive Merchandise Selection. Customers have a we can update training as rapidly as the prod- nature of the consumer electronics industry variety of needs. Today, a couple may be uct cycle develops. Integration with our exist- means Circuit City customers often find store choosing between an analog big-screen or a ing store systems adds a quality-control prices that are lower than prices on a variety digital-ready television for their family room. element, ensuring that sales counselors have of Web sites. Tomorrow, the same couple may select a completed required training programs before 13-inch small-screen television for a child’s interacting with customers. All sales training bedroom. Whatever the need, we want Circuit will take place online, saving the time and City to be their store of choice. expense of off-site travel. Online access allows 11 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  14. 14. Portable memory devices such as Memory Stick allow today’s products to offer ease of use in a compact size. New technology displays and increased self-service merchandise displays are features of our newest store design. Informative merchandise displays help consumers sort through complex choices. 12 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  15. 15. CIRCUIT CITY sales counselors to easily and quickly retrieve The key to making shopping easier information from training materials or online is taking the mystery out of technology. mentors. In short,Web-delivered training is faster, better and more effective. Well-trained, knowledgeable sales counselors and hands-on product For new, complex technologies, a product demonstration and explanation of features demonstrations help Circuit City and benefits are the best way to help consumers understand which products and services best customers understand and purchase fit their lifestyles. In fiscal 2000, new television the new technologies that are driving displays gave side-by-side comparisons of big-screen analog televisions with the newer industry growth. digital televisions. In markets where high-speed cable service is available, customers could see a demonstration of the features that broad- We provide factory-authorized repairs at 35 digital video and digital audio displays to band Internet access provides. And, digital service centers nationwide and through 1,700 highlight expanding product selections and imaging displays showed consumers how trained technicians. Customers simply take the related services. to edit vacation pictures and e-mail them to product requiring repair to their closest Circuit friends and family. City Superstore, and we express ship it to our In new and remodeled stores, we are adding nearest service center. In-home repair service “take-with” displays where customers easily Beginning in the summer of 2000, Circuit City is available for big-screen televisions and can pick up products they know about right Superstores will feature AOL Centers offering major appliances, and a third-party warranty from the shelves. Today, some customers need an array of interactive products and services. provider supplies in-home service for personal less sales assistance when choosing items such Circuit City will demonstrate for consumers computer products. as telephones, portable radios and VCRs, which everything they need for home connectivity, have high household penetration and relatively including Internet access via AOL. As broad- Customers can exchange their products and, if low prices. And yet, even for these product band technologies become available through necessary, receive a refund at any Circuit City lines, sales assistance is always available if AOL, we expect to add these demonstrations to store, even if they have misplaced their receipt. customers prefer it. the AOL Centers. Finally, if a customer has an issue that is not resolved through our stores or in our product Service After the Sale. Circuit City’s commit- Also by the summer of 2000, every Circuit service centers, he or she has toll-free access ment to satisfied customers does not end with City Superstore will feature a Memory Stick to customer service representatives who can the sale. Circuit City Associates deliver and Interactive Universe dedicated to introducing usually quickly resolve the problem. install televisions, ranges, refrigerators, washers customers to Sony’s diverse line of Memory and dryers with the same high level of knowl- Stick products, including cameras,camcorders, edge our customers experience in our stores ON THE WEB printers, portable music players,VAIO personal and the same commitment to service. More In July 1999,Circuit City launched its e-commerce computers and Memory Stick media. We also than 95 percent of our home deliveries occur Web site, extending the Circuit City offer to are enhancing our wireless communications, within one day of the product purchase. Internet shoppers and delivering a combination of options that only a retailer with a national 13 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  16. 16. Customers who order online have the option of Express Pickup at a convenient Circuit City Superstore. Circuitcity.com tightly integrates cyber-shopping with our nationwide brick-and-mortar presence. In our test lab, consumers provide valuable input into the development of circuitcity.com. Superior customer service is the number one goal of Associates throughout our organization. 14 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  17. 17. CIRCUIT CITY store base can provide. We have tightly integrated We have tightly integrated circuitcity.com circuitcity.com with our Circuit City Superstores, with our Circuit City Superstores. Customers offering the best of cyber-shopping and tradi- tional retailing. Our Web site provides the same can choose to pick up products at the store commitment to selection, price, information or have them shipped to their home. Our and service found in Circuit City stores. online customers shop with the confidence Merchandise Selection. At the end of fiscal 2000, circuitcity.com offered more than 1,500 and knowledge that Circuit City stands products for sale and information on more behind every purchase. than 2,100 products. We continue to expand the product selection with plans to add wireless and broadband services, an expanded assort- ment of game hardware and a full assortment Service After the Sale. Circuit City’s online Superstore on the day of pickup. When the of game software in fiscal 2001. customers shop with the confidence and customer goes to the point-of-sale register, knowledge that Circuit City stands behind the transaction is automatically checked by Circuit City gives Internet shoppers the ability every purchase. Customer service via e-mail is the register system against the in-store price, to check the inventory of up to three Circuit City available seven days a week. If a product needs and the customer receives the lower price. In Superstores in their market, as well as the in- service, online customers can take the product addition, the e-Superstore offers Web-only stock availability directly from the e-Superstore. to their local Superstore where it receives the specials on items that are not available in The inventory information is updated every same factory-authorized repair service avail- sufficient quantity to supply our nearly 600 day and verified in real time when the customer able for in-store purchases. Customers can Superstores nationwide. chooses to purchase an item. The customer can exchange or return an e-Superstore product choose to have the product shipped through at any Circuit City Superstore location, with Information. Consumers can find in-depth the e-Superstore for normal shipping costs or refunds available immediately. product information on circuitcity.com, begin- can use the Express Pickup service and avoid ning with a basic overview of key features and shipping charges. When a customer chooses Whether consumers choose to buy in the store model choices in each product line. In addition, a product from local store inventory, he or she or online, Circuit City is committed to being the overview includes a glossary of terms, completes the purchase transaction online, the retailer of choice for consumer electronics, answers frequently asked questions and provides and the purchased item is removed from store personal computers and appliances. Making it technical details. Consumers then can compare inventory and reserved for the customer to pick easier to embrace new technology and to shop side-by-side the product features and prices up. Using the Express Pickup feature, customers for all products will help bring our Circuit City of as many models as they wish to select. For can cyber-shop at lunch time and pick up their customers and our shareholders the rewards of example, at the end of the fiscal year, consumers purchases on their way home from work. the digital product revolution. could compare as many as 35 features of 25 camcorders, 16 features of 17 DVD players, or Price. Customers who choose the Express 38 features of 116 refrigerators. Pickup option automatically receive the lower of the e-Superstore price on the day of their purchase or the in-store price at their selected 15 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  18. 18. Making it easier at car-buying process.
  19. 19. every step of the At CarMax, we are making it easier for consumers to buy the car that is right for them. The CarMax offer—low, no-haggle pricing; broad selection; certified quality and friendly service—lets our sales consultants focus on the customer,not “the deal.” And,these sales consultants help the cus- tomer throughout the transaction, extending our price commitment to trade-ins, financing and warranties. Shopping for a car The CarMax Way is shopping for a car the consumer’s way.
  20. 20. All CarMax customers receive low prices without having to negotiate. Browsing our extensive selection is easy with our customer-friendly online inventory system. The CarMax goal: make buying a car easy. 18 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  21. 21. CARMAX CarMax has set new standards in automobile retailing. In pricing, in selection, in quality and in service, more and more consumers are finding their way is The CarMax Way. every car we appraise, CarMax provides a writ- Making it easier for consumers at every step of of subcompact, mid-size or luxury cars, sport ten purchase offer that is good for seven days or the car-buying process is the core of the CarMax utility vehicles, trucks and minivans. To assure 300 miles. Customers may apply their appraisal offer. Using what consumers have told us they that the selection reflects the preferences of voucher to a purchase or simply receive a check. want—in pricing, selection and service— consumers in the market, the majority of our This process increases the trust between CarMax vehicles are purchased locally, either from con- CarMax has set new industry standards for the and the consumer, provides our most important sumers in the market or at regional auctions. car-buying experience. source of used cars and allows us to match our As a result, we are able to offer the brand names inventory with the tastes of local purchasers. and vehicle models that are in high demand. PAYING THE RIGHT PRICE Independent auto industry experts continue to The same sales consultant who facilitates the car CarMax used cars are less than six years old and find that consumers believe negotiating the right purchase also explains our no-haggle,competitively have fewer than 60,000 miles. They generally price is the most difficult and unpleasant part priced financing and warranty programs. For range in price from $6,500 to $30,000. We also of buying a car. At CarMax, we have solved that financing,the sales consultant simply enters basic offer a selection of top-quality older cars for problem with low, no-haggle prices at every credit information directly into the CarMax system. the most cost-conscious consumer. Called stage of the transaction. On most cars, CarMax First North American Credit,CarMax’s finance ValuMax®, these vehicles are either older than used-car prices average $1,300 below Kelley Blue operation,and Bank of America provide primary six years or have more than 60,000 miles. Book prices; more than 80 percent of our new credit. Customers approved by both sources can Their prices range from $4,000 to $19,000. cars are priced below manufacturer’s invoice. see and select from the terms and rates offered. For both new and used cars, all CarMax cus- Sub-prime financing is available from a variety of In addition to selling used cars, CarMax operates tomers receive these competitively low prices third-party lenders. Warranty terms and rates also 20 new-car franchises. Fifteen are integrated or without having to negotiate. Best of all, with are provided online,and the customer sees and co-located with CarMax used-car superstores. low, no-haggle pricing, CarMax sales consultants selects from the available choices. Five franchises operate as stand-alone new-car can focus solely on helping customers find the locations. As with used cars, CarMax employs its vehicles that meet their individual needs. low-price, no-haggle selling process with new FINDING THE RIGHT CAR cars. At all new-car locations, the full selection of As part of the no-haggle philosophy, trade-ins CarMax superstores offer consumers the broadest the manufacturer’s models is available. CarMax are handled as a separate transaction. In fact, selection in the used-car industry. Consumers new-car franchises include Chrysler, Plymouth, consumers may sell their car to CarMax whether may select from as many as 600 used cars on a they are buying a car from us or not. On virtually single CarMax lot, choosing from a wide variety 19 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
  22. 22. On carmax.com, customers find compre- hensive information and prices on each vehicle from the comfort of their home. The 10,000-vehicle inventory is updated daily. CarMax certifies the quality of each vehicle following a thorough inspection and reconditioning. CarMax Associates are setting a new industry standard by giving consumers what they have asked for in a car-buying experience. 20 CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT

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