Circuit City Has Boomed to an Electronics Metropolis

People who like to stay home evenings, pop a frozen dinner in the microwave and watch a rented video have made Richard L. Sharp a happy man.

“That’s clearly one of the trends which has contributed to the popularity of the VCR and microwave,” said Sharp, president and chief executive officer of Circuit City Stores Inc., which has ridden to phenomenal success the boom in the two consumer products over the past decade.

Sharp has seen his business grow from a small seller of consumer electronic items, with half its operations in other company’s stores, to one of the nation’s largest retailers of brand-name electronics and appliances.

Circuit City operates in 53 U.S. markets, most of which have one or more of the company’s huge Superstores displaying a vast array of wares. In 1989, the chain entered the local market as it opened stores in San Diego and National City.

Along with the growth in operations and sales has come impressive stock gains.

Circuit City’s shares, which trade on the New York Stock Exchange, increased more than 8,100% during the 1980s, from an adjusted-for-splits price of 26 cents a share at the beginning of the decade to $21.75 on Friday.

The gains made Circuit City one of the top 20 stock winners of the ‘80s. The company has 125 Superstores, usually 32,000-square-foot operations that feature rows and rows of stereos, televisions, freezers, refrigerators and other products. Roaming through the displays are aggressive sales personnel--a large portion of the company’s 15,000-member work force--seeking out buyers for the low-priced goods.

Circuit City still has 20 smaller stores, but Ann Collier, financial relations manager for the company, said those outlets eventually will be replaced with Superstores.

The Richmond-based company’s operations stretch along the Eastern Seaboard from Pennsylvania to Florida, and are in three Western states: California, Nevada and Arizona.

At the beginning of the decade, almost half of Circuit City’s 70 selling units, which then carried electronics but not appliances, were departments operating inside other stores, Collier said.

But then the company repositioned itself to cash in on the popularity of VCRs and microwaves with its megastores. It also got out of New York City, where real estate prices prohibited the Superstore format, “to focus our resources in the areas of greatest opportunity,” Collier said.

Today, she said, 23% of the company’s sales come from VCRs and video cameras, providing a nice balance to the 24% that comes from TV sales, 22% from audio equipment and 20% from appliances. Sales of other electronic items make up the remaining 11%.

Sharp, Circuit City’s chief since 1986, pushed the company into five new markets in 1989, including its first stores in Philadelphia and Phoenix. He also replaced two regular stores with Superstores in Washington.

For the first nine months of its fiscal year, which ended Nov. 30, the company’s sales reached $1.4 billion, a 21% increase over the same period a year ago.

Jeff Saut, director of research at the Richmond investment firm Branch, Cabell & Co., was wary about recommending Circuit City stock.

“If the economy is going to have a soft landing, it’s a buy,” he said, referring to the gentle reduction in economic activity than is the goal of the Federal Reserve Board. “If it’s a hard landing, then it’s questionable.”

Saut said the company’s appliance sales are showing some weakness but that the electronics are still doing well.

Sharp acknowledges that it’s easier to grow faster when sales are $100 million a year instead of approaching $2 billion.