Circuit City Stores Increported a wider-than-expected quarterly loss on Thursday as sales of projection and tube TVs sagged, and its shares sank as much as 17 percent to a nearly four-year low.
The retailer, which is cutting jobs and changing store procedures in a bid to turn business around, said it expected a loss from continuing operations for the fiscal year ending in February, while analysts were expecting a profit of 38 cents a share.
Circuit City is clearly struggling with the challenging (consumer electronics) environment, attempting to implement a massive amount of change throughout the business, and is, characteristically, executing far less well than Best Buy, Sanford Bernstein analyst Colin McGranahan said in a research note.
Best Buy Co, Circuit City's bigger rival, reported better-than-expected quarterly results this week and raised its full-year forecast.
The loss at Circuit City came to $62.8 million, or 38 cents a share, for the second quarter that ended August 31, compared with a year-earlier profit of $10 million, or 6 cents a share.
Analysts had expected a loss of 12 cents a share, according to Reuters Estimates.
The company, which earlier this year introduced a plan to replace more seasoned store workers with lower-paid staff, said sales fell 6.2 percent to $2.64 billion. That was below analysts' estimates of $2.77 billion.
Sales at stores open at least a year fell 7.9 percent, which McGranahan said pointed to material share loss in light of a 1.7 percent rise for Best Buy.
In the United States, Circuit City's same-store sales fell 8 percent. The Richmond, Virginia, company said U.S. sales through the Web and other direct channels increased 20 percent, while computer service and home theater installation revenue rose 22 percent.
But television same-store sales fell at a double-digit percentage rate, as weaker demand for projection and tube TVs offset a rise for flat-panel TVs.
Gross profit margin came to 20.7 percent of sales, down from 23.8 percent a year earlier, battered by lower extended warranty sales and weak margins on computers and TVs.
Circuit City forecast a loss from continuing operations for the third quarter and a profit for the fourth quarter, which includes the Christmas holiday.
Analysts expect a loss of 3 cents a share for the third quarter and profit of 86 cents for the fourth, according to Reuters Estimates.
Circuit City's stock was down $1.72, or 16.2 percent, at $8.85 in morning New York Stock Exchange trade after falling to $8.77, their lowest level since January 2004. Best Buy was down 83 cents, or 1.8 percent, to $46.64.
Circuit City is down 53 percent so far this year, while Best Buy is off 5 percent.