Circuit City Continues to Struggle
The Richmond electronics retailer is eating through its cash as it tries to turn around the operation.
In its earnings release today, Circuit City said it had cash, cash equivalents and short-term investments of $92.5 million as of Aug. 31, compared to $424.4 million a year before. The company attributed the cash drain to the "net loss from operations and purchases of property and equipment...partially offset by net proceeds from short-term borrowings."
Here's AP's report:
My Michael Felberbaum
RICHMOND, Va. -- Circuit City Stores Inc. posted a wider second-quarter loss Monday, and the nation's second-largest consumer electronics retailer withdrew its fiscal 2009 outlook amid sluggish sales, poor traffic and heightened competition.
Circuit City said it lost $239.2 million, or $1.45 per share, in the three months ended Aug. 31, compared with a loss of $62.8 million, or 38 cents per share, in the same quarter last year. Excluding $73 million of non-cash asset impairment charges, the loss came to $162.7 million.
Sales declined 10 percent to $2.39 billion from $2.64 billion. Consolidated same-store sales declined 13.3 percent.
Analysts polled by Thomson Reuters had expected a loss of $1.04 per share and $2.53 billion in sales.
Its shares fell 16 cents, or nearly 12 percent, to $1.21 in early trading Monday.
"Clearly, the performance of the company is unacceptable to all of our stakeholders, and it is imperative that we take the right steps to accelerate our turnaround," said James A. Marcum, vice chairman and acting president and chief executive, in a statement.
The company also said it was "prudent" to withdraw its previous outlook for fiscal 2009.
Chief Financial Officer Bruce H. Besanko said sales remain challenged by a significant decline in traffic, competition and a weakened brand position.
Circuit City also announced it is undertaking a comprehensive review of the business and has identified key initiatives for the holiday season, including a focus on enhancing the shopping experience, improving inventory on key items and upgrading signage.
"Heading into our most important selling season, we are focused on consistent and successful execution in key areas that will drive traffic and build customer confidence," said Marcum, who replaced Philip J. Schoonover, who stepped down last week.
Marcum, who was appointed vice chairman last month, was one of three directors elected to Circuit City's board in June as part of a deal to defuse a proxy fight with Mark J. Wattles, whose investment firm holds a 6.5 percent stake in the company.
Circuit City also said Monday that while strategic options will always be explored, it is "prudent to focus internally on improving the company's performance in order to operate as a standalone business."
In May, Circuit City announced it hired Goldman Sachs & Co. to explore strategic options, but has never given an official timetable for any action. The move came as the retailer opened its books to Blockbuster Inc., which had made a takeover bid of more than $1 billion with plans to create a 9,300-store chain to sell electronic gadgets and rent movies and games. The Dallas-based movie-rental chain withdrew its bid in July because of market conditions.
In the second quarter, Circuit City's video sales saw a high single-digit decrease, with low single-digit sales growth in flat-screen televisions unable to offset significant sales decreases in tube and projection televisions. Sales of camcorders and DVD hardware fell by double digits. Sales of digital TV converter boxes did offset some of the declines in the category, the company said.
Sales of information-technology products fell by double digits in the first quarter, as sales of notebook computers grew and sales of desktop computers continued to decline.
Sales of extended warranties fell about 8 percent in the quarter, and revenue from Firedog, the company's PC services and home-installation business, decreased 5 percent, Circuit City said. Internet- and call center-originated sales grew 1 percent.
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