Circuit City annual meeting comes amid buyout talk

Adding to uncertainty created by the slowing economy is the possibility of a buyout for the Richmond-based retailer, which has seen only one profitable quarter since mid-2007.

The company says many of its recent financial problems result from actions intended to improve its long-term stability. But analysts say a lot remains to be done if Circuit City is to endure slowing consumer spending and challenge industry-leading Best Buy Co. Inc.

"They're in a tough position because it is going to take them several quarters to kind of work through some of the changes that they've been making," BMO Capital Markets analyst Rick Weinhart said in an interview with The Associated Press. "You've got to be looking at this company and trying to see something that's not there today in order to be buying it."

Chief Executive Philip J. Schoonover agrees.

"Fiscal year 2009 will be a year of very hard work and focus on execution," he told investors last week. "We expect to improve our financial performance, compared with fiscal year 2008, and set the stage to return to sustainable profitability in the future."

While the company is confident the multiyear plan will work, Weinhart said the management team was guilty of trying to do too much too fast.

"You're walking a fine line between doing too much and not doing enough and falling behind Best Buy," Weinhart said.

Last week, Circuit City said its loss widened in the first quarter because sales fell more than 11 percent at established stores. It reported a loss of $164.8 million in the three months ended May 31 compared with a loss of $54.6 million a year earlier.

Rival Minnesota-based Best Buy reported a 7 percent drop first-quarter profits last week, saying net income dipped to $179 million from $192 million.