Saturday, January 17, 2009
Financial Comparison between Circuit City vs Best Buy
The two companies differs starting from the sales. The foundamental issues are sales and profits. --Annual sales of Circuit City have been cyclic while the sales of Best Buy have been increasing through 2008, even in the last recession --Profits The gross margin of the two companies are similar. CC's gross maring has been hovering around 24% until 2008 after it laid off seasoned sales people to cut cost. While Best Buy gross maring dropped around 1996, probably due to the price discounts. But but the two bifurcates from operating margin. CC's operating margin never really surpassed 2% and even below zero sometims. BB's operating margin has been always above 2% except in 1997. It reflected CC's poor cost management. --Inventory CC tried hard to improve inventory management, Inventory Cash days and AR Turn-days have all decreased while AP increased. --Leverage is not an issue at all.