The Washington Post
Circuit City Reports a Loss in 1st Quarter
RICHMOND, June 20 — Electronics retailer Circuit City, which earlier this year cut jobs and restructured in an effort to keep up with competitors, reported a $54.6 million quarterly loss Wednesday and withdrew its financial guidance for fiscal 2008.
For its fiscal first quarter, which ended May 31, Circuit City reported losses of 33 cents per share, compared with a profit of $6.4 million, or 4 cents a share, a year earlier.
Sales fell 4 percent, to $2.49 billion from $2.6 billion. Sales at stores open at least a year, known as same-store sales, fell 5.6 percent. A year earlier, sales rose 17 percent, and samestore sales rose nearly 15 percent.
Circuit City announced in March that it planned to lay off about 3,400 retail employees and replace them with lower-paid workers and outsource its information technology work to IBM. Last month, the company cut retail management positions and eliminated about 200 corporate-office jobs.
Circuit City, the nation’s No. 2 consumer electronics chain, and No. 1 Best Buy have faced growing competition from Wal-Mart and other discount retailers. On Tuesday, Best Buy reported an 18 percent decline in first-quarter profit and lowered its 2008 earnings estimate. The Richfield, Minn., company blamed a softening economy for weaker sales of such highmargin items as flat-screen televisions.
“While I am disappointed with the large net loss for the first quarter, we met our revised guidance while up against our toughest comparable-store sales increase comparison of this fiscal year,” Circuit City chief executive Philip J. Schoonover said in a written statement. “We made significant and substantial changes to improve Circuit City and position the company to compete while facing economic uncertainty in the near term and new realities in the consumer electronics marketplace over the longer term.”
Circuit City said last month that it expected to lose $80 million to $90 million in the first quarter from continuing operations, with sales of flat-panel and projection televisions trailing off.
Though Circuit City withdrew its 2008 guidance, Schoonover said in a conference call with analysts that the company expected its costcutting measures to save $200 million over the year. Though some of the savings will be offset by other expenses, the company hopes to be able to invest in new stores, IT systems, online-selling capability and its Firedog installation business, Schoonover said.
Schoonover also said the major restructuring changes that have been completed will allow the retailer to be prepared for back-toschool and holiday sales.
Though Circuit City and Best Buy have had weaker TV sales, David L. Mathews, a Circuit City executive vice president, noted in the conference call that wholesale-type outlets such as Costco and Sam’s Club have retained strong TV sales.