Posted on 12/21/2007 9:31:50 AM PST by Moonman62
Circuit City Posts Wider-Than-Expected 3rd-Quarter Loss, Shares Tumble
RICHMOND, Va. (AP) -- Shares of electronics retailer Circuit City Stores Inc. lost nearly a quarter of their value Friday morning as investors reacted to a wider-than-expected loss driven by lower extended warranty sales and business interruptions the company blamed on ongoing restructuring efforts.
"Clearly we are very disappointed," Chief Executive Philip Schoonover told Wall Street analysts during a conference call. Schoonover said the company underestimated the financial impact of cost-saving initiatives on sales. "Our current focus is to rebuild our selling culture," he said.
The results came three days after larger rival Best Buy Co. reported its third-quarter profit jumped 52 percent, ahead of analyst expectations for the Richfield, Minn., retailer.
For the three months ended Nov. 30, Circuit City's losses ballooned to $207.3 million, or $1.26 per share, from $20.4 million, or 12 cents per share, a year ago. Excluding tax-related accounting items, losses totaled 64 cents per share in the latest period.
Sales slipped 3 percent to $2.96 billion from $3.06 billion a year earlier, with sales at stores open at least a year falling 5.6 percent.
Analysts were clearly disappointed.
Chris Horvers from Bear Stearns asked Schoonover in the conference call if he had considered throwing in the towel and looking for a buyer. "It seems every quarter comes as surprise as to the amount of disruption," Horvers said.
Schoonover, however, maintained Circuit City is on the right track. "We're implementing the right initiatives to lead to profitability and sustained growth," he said. "We're staying the course on our longer-term strategic initiatives."
The results missed consensus estimates of analysts polled by Thomson Financial, who predicted a loss of 31 cents per share on revenue of $3 billion.
Looking ahead, the company said that assuming current sales and margin trends continue for the rest of the fourth quarter, it will report a "modest" pretax loss from continuing operations for the quarter.
Circuit City also said it has received a commitment to more than double its $500 million credit line to $1.3 billion.
Its shares fell $1.52, or 22.8 percent, to $5.14 in morning trading Friday after briefly sinking to a 52-week low of $4.93 earlier in the session.
In the third quarter, Circuit City's video sales fell by high single-digits, as significant sales decreases in tube and projection televisions more than offset double-digit sales growth in flat-screen televisions. Sales of camcorders and DVD hardware fell by double digits.
Sales of information-technology products were up slightly in the third quarter, as sales of notebook computers grew and sales of desktop computers declined by double digits.
Circuit City's audio sales fell by double digits in the period. While purchases of navigation products saw triple-digit increases, portable digital audio, home audio and digital satellite radio items saw a significant sales decrease.
In the entertainment category, the company saw a double-digit increase in video gaming products, while video and music software declined by double-digits.
Revenue from Firedog, the company's PC services and home-installation business, increased 29 percent, Circuit City said. Sales of extended warranties were $67.4 million, compared to $103.3 million in the same period last year.
The company said it planned to open 61 to 63 new and relocated U.S. Superstores in fiscal 2008; two-thirds of the openings will be 20,000-square-foot stores, called "The City," with a new look and different fixtures, lighting and product selection. It also expects to open 50 to 60 new and relocated stores in fiscal 2009.
On Wednesday, Circuit City announced the approval of millions in cash incentives to retain its top talent following the departure of several key executives over the past year. Executive vice presidents could claim retention awards of $1 million each and senior vice presidents could get $600,000, provided they stay with the company until 2011, according a filing with the U.S. Securities and Exchange Commission.
The bonuses didn't sit well with Merrill Lynch analyst Danielle Fox, who questioned whether Circuit City should be focusing on incentives for the people who sell its products in stores.
"It seems like the top executives are getting paid more for poor performance," Fox said. "I don't see really what the incent is for them to perform, to stay with Circuit City."
Schoonover said the bonuses are essential to keep together a team he spent three years assembling. He added that Circuit City offers competitive starting wages for store employees and gives performance bonuses to supervisors.
Circuit City: http://www.circuitcity.com
Yeah, firing those pesky, successful, sales people was not the brightest of moves.
Translation: "We need to sell more stuff"!
“They shouldn’t have fired their best employees.”
They’ll be doing b-school case studies about Circuit City for the nest 100 years, under the heading of “How to wreck your business”.
It’s really unpleasant to shop there now. Nobody can help you do anything. They just stare at you and shrug.
Dear Valued Customer Sir/Madam:
Thank you for contacting circuitcity.com regarding our use of the terms “Holiday” or “Christmas.” “Christmas” does appear in our holiday advertising from time to time. The majority of our advertising during this time of the year references the term “holidays” because this is a special time of year for people of several faiths, and we believe the term “Holidays” is more inclusive. From its beginning, Circuit City has maintained a strong tradition of respect for all of the major religions in our diverse nation. We also believe that most Americans, including those who celebrate Christmas, recognize the fact that this is a diverse country with good people of many faiths. Signage in our stores is designed to be posted for extended periods, so it does not reference any specific holiday by name at this time of the year.
We thank you again for your feedback.
Let’s see: No incentives for sales people. Poor product selection. Hot items out of stock. Dingy stores with bad layouts. Reduced product offerings.
Best Buy offers rewards programs for customers, a wider selection of products, more knowledgeable salespeople, nicer stores.
Gee, why did our sales go down?
Translation: "We need to sell more stuff"!
My translation would be 'we need to hire folks who know how to sell to replace the top sales folks we fired to save a few dollars for bonuses for the execs'.
Once CC dumped their commission sales structure which caused their salesmen to be always right there "helping" you, I saw little difference between them in their salesmanship.
Maybe BB gets a lot of their profits from the appliance section.
Because no one is buying electronics these days!
/s
Now there's some irony. Yo Chris, let's see who sells part of their company to Singapore first, Circuit City or Bear Stearns.
You should ask them exactly what “Holiday” is it they are referring to in their ads.
I did some shopping at Fry's yesterday afternoon. Full parking lot, mediocre sales help, good selection of what I was looking for; quick checkout, where they surprised me with paperwork to file for a 30% rebate. (I don't like rebates, didn't know of this one, and didn't factor it in to my purchase decision.)
I'd earlier shopped Sears - easy parking, decent sales help, picked over selection.
What Best Buy did you go into? The one here is on my permanent **** list.
Sales are down, only for bad companies :-)
U.S. Retail E-Commerce Sales in October 2007 Grow 19 Percent versus Last Year
Video Games, Consoles & Accessories Continue to Post Strong Growth
RESTON, VA, November 13, 2007 – comScore, Inc. (NASDAQ: SCOR), a leader in measuring the digital world, today released U.S. e-commerce spending figures for October 2007, showing that retail e-commerce increased 19 percent versus year ago to nearly $10 billion.
http://www.comscore.com/press/release.asp?press=1896
Circuit City exists for the sole purpose of making Best Buy look like it isn’t the worst store in America.
Best Buy is not that much better than Circuit City. My brother quit working at Best Buy because he was getting paid the same amount of money per hour no matter how many sales he made (including expensivre home theater systems). Both stores need to enact a commision system to better motivate their employees in taking care of the customer.
I am a big Best Buy fan. The only store for electronics as far I am concerned. Lots of salespeople, lots of help, rewards program excellent service. Circuit S!!@@ does not come close.
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