Friday, December 21, 2007

Circuit City posts wide loss

Circuit City reported a much wider-than-expected third-quarter loss Friday that the company blamed on its ongoing store reorganization and double-digit sales declines of gadgets like camcorders, DVD players and video imaging systems.

The Richmond, Va.-based company - No. 2 electronics retailer after Best Buy - reported a loss from continuing operations of $208 million, or $1.26 a share.

Shares declined 26 percent in pre-market trading.

Excluding certain items related to tax adjustments in the quarter, the retailer posted a loss of 64 cents a share.

"We are very dissatisfied with our third quarter results," Circuit City CEO Philip Schoonover said in a statement. "We underestimated the financial impact from the disruption of our transformation work."

Schoonover went on to say that Circuit City's "issues are primarily self-induced and are within our control to improve."

Anthony Chukumba, analyst with FTN Midwest Securities, said Schoonover is under even more pressure now given "Circuit City's string of poor earnings results."

"This company has had a lot of turnover in its executive suite and its being outperformed by Best Buy," he said.

Circuit City shares have slumped 65 percent so far this year versus a 5 percent gain in Best Buy shares.

Earlier this week, Best Buy (BBY, Fortune 500) reported its third-quarter sales and profits that topped estimates, although it cautioned that fewer sales reporting days in December this year could hurt its fourth-quarter results.

On Thursday, Circuit City announced retention awards for a number of top executives, including its chief financial officer and other senior vice presidents.

However, the company said Schoonover was not included in the retention plan.

Chukumba said he was not reading too much Schoonover's exclusion, for now. "A company shouldn't have to give its CEO more incentives just to do his job," Chukumba said.

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