Circuit City Posts Loss, Hurt By Weak TV Sales, Store Closures

A Circuit City store in Richmond, Va.
Steve Helber
A Circuit City store in Richmond, Va.

Electronics retailer Circuit City Stores said it swung to a fiscal fourth-quarter loss, hurt by store closing charges and slower sales growth related to a decline in flat-panel television prices and uneven demand for computer hardware.

Circuit City said it would accelerate cost-cuts by
trimming layers of management, controlling discretionary spending, improving direct sourcing and taking other moves.

"We must move with urgency to develop a world-class retail platform" and expand revenue, Circuit City Chief Executive Philip Schoonover said in detailing the changes during an earnings conference call.

The CEO also said the consumer electronics retailer has identified "several" candidates for the post of chief financial officer and expects to begin interviews shortly.

For the quarter ended Feb. 28, the retailer reported a loss of $12.2 million, or 7 cents a share, compared with profit of $141.4 million, or 81 cents a share, a year ago. The latest period included pretax charges of $144.6 million related to store closings and restructuring, as well as an impairment charge of $92 million at the company's international unit.

Analysts polled by Thomson Financial were looking for profit, excluding items, of 63 cents a share in the quarter.

Sales rose 1% to $3.93 billion from $3.89 billion, but fell short of the Street's $4.04 billion consensus estimate. Sales at stores open at least a year slipped half a percent.

'Fourth-quarter sales growth was somewhat less than we expected,' said Philip J. Schoonover, chairman, president and chief executive. 'Flat panel television average selling prices were well below the prior year, and our PC hardware business experienced volatility around the Microsoft Windows Vista operating system transition.'

Circuit City said PC hardware posted strong sales growth in both December and February, but January sales were hurt as the company kept PC inventories lean in advance of the Vista introduction.

The company's shares closed Tuesday at $18.28 on the NYSE. Since hitting a high of $31.54 a year ago, the stock has steadily declined and recently hit a new year-low of $17.02.