REV: NOVEMBER 13, 2012
JOHN R. WELLS GALEN DANSKIN
The Rise of Circuit City Stores, Inc.
“I believe, absolutely, this is a great time to be Circuit City.” — Alan McCollough, June 2000
In June 2000, Alan McCollough succeeded Richard Sharp as CEO of Circuit City. McCollough had a lot to live up to. Since Sharp had taken over as CEO in 1986, Circuit City Stores had grown more than tenfold to become the leading specialist consumer electronics retailer in the world, selling consumer electronics, home office products, entertainment software (CD’s DVD’s, computer games), appliances, and related services. Moreover, fiscal 2000, ending on February 29, 2000, had proved to be a blockbuster with sales up 17% at $12.6 billion and operating profits growing 86% from the previous year and reaching an all-time high of $541 million. The $58 stock price on April 7, 2000 was an alltime high. Despite this track record, McCollough was confident of continuing success. New digital products, from high-end cameras to home cinema systems and digital televisions, were beginning to flood the market, promising to play to Circuit City’s traditional strength in service. In his first address to shareholders as chief executive, McCollough stated, “If we could look back 10 years from now, what we would discover is that the time we are in today is the most explosive in the consumer electronics industry.”1 Circuit City had other reasons to be confident. Car Max, Circuit City’s revolutionary new model for retailing second hand cars, reached $2 billion in sales in fiscal 2000 and showed its first profit. However, Circuit City was not without its challenges. Competition was mounting in appliances from big DIY chains such as Home Depot while Best Buy with a similar product mix to Circuit City achieved revenues of $12.5 billion in fiscal 2000, and continued to gain ground with its low service model. Much depended on the Circuit City’s ability to ride the upcoming digital wave.
1949 – 1970 Early Years 2
In 1949, Samuel S. Wurtzel learned from a local barber that the first TV station in the South was about to go on the air. Wurtzel decided to take advantage of the new opportunity by renting 1,200 square feet of space in a local tire store in Richmond, Virginia and displaying 6 TV sets. The retail ________________________________________________________________________________________________________________ Professor John R. Wells prepared the original version of this case, “Circuit City Stores, Inc.: Strategic Dilemmas,” HBS No. 706-419, which was developed from published sources. This version was prepared by Professor John R. Wells and Research Associate Galen Danskin. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2012 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
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The Rise of Circuit City Stores, Inc.
outlet operated under the name Wards Company, an acronym for family names Wurtzel, Alan, Ruth, David, and Samuel. 3 By 1959 Wards operated four television and appliance stores in Richmond and annual sales reached $1 million. In 1960, Wards began expanding its operations by licensing departments in mass merchandising discount stores around the country. In 1961, the company made its first public offering, raising $600,000 to fund the expansion. By 1963, sales had reached $6 million. In 1964, the company added a fifth stand-alone appliance and...