The overaggressive store expansion strategy starting in late 1990s. 3. Increasing number of associates and SG&A as a % of sales put pressure on operating margins
- 2008 Circuit City 2008 2007 2006 Z-score 3.46 4.05 4.35 Current Ratio 1.52 1.68 1.75 Inventory Turnover 7.46 7.60 6.78 Fixed Asset Turnover 11.32 13.50 13.72 ROA -8.57 -0.25 3.61 Although still in the healthy zone in 2008, the Z-score was declining. Bankruptcy factor
operating margin as a % of sales started declining in 1994, concurrently with the increase in number of Circuit City stores except for a blip in the year 2000, when Richard Sharp stepped down as the CEO making way for Alan McCollough.
◦ Supply-chain and related capital projects ◦ Improved same store sales, sales per square foot, losers closed • 2 years ◦ Channel integration ▪ Mall-based RadioShack stores ▪ Online Circuit City website ▪ Circuit City superstores ▪ Mail-order catalog
and related capital projects ◦ Synergies realized, esp. in sourcing ◦ Consolidation complete ▪ Distribution centers, greenfields constructed • 5 years ◦ Continued focus on consumer electronics ◦ Focus on product mix ◦ Expansion, Canada, China ◦ Improved sourcing ▪ Building of CC brands ▪ Partnering with suppliers like Apple