Circuit City Loss Widens19 Jun, 2008 By: Erik Gruenwedel
Circuit City Stores Inc. reported first-quarter (ended May 31) losses of nearly $165 million, three times the loss ($55 million) it posted during the previous-year period.
The Richmond, Va.-based No. 2 consumer electronics retailer continues to move in the opposite direction of rival Best Buy Co. Inc., as it recorded near double-digit same-stores (open at least 12 months) sales declines across multiple categories, including audio, video (television, digital imaging and camcorders) and PCs.
The retailer did post a slight same-store sales increase in flat-panel high-definition TVs.
In entertainment, strong double-digit comparable sales increase in video games (aided by Grand Theft Auto IV) and related products was offset by double-digit declines in music CD and DVD movie sales.
CEO Philip Schoonover said the company had resolved a potential proxy battle with dissident shareholder Mark Wattles, co-founder and former CEO of Hollywood Video, who has a 6.5% stake on Circuit City.
The retail chain, which saw available cash and cash equivalents fall to $92.2 million from $364.1 million last year, said it expects to lose from $170 million to $185 million in the second quarter, which ends Aug. 31.
Overall quarterly sales topped $2.3 billion, compared to nearly $2.5 billion last year.
Schoonover said Circuit City would stop issuing dividend payments so the board could better focus on exploring strategic alternatives, which include an acquisition offer from Blockbuster Inc.
Edward Woo, media analyst with Wedbush Morgan Securities in Los Angeles, said the results underscored Wall Street's hesitation toward Blockbuster's buyout offer.
“Technically, Blockbuster is still doing its due diligence, but unofficially, it adds more fuel to the fire about why [it] should just walk away from Circuit City's troubles,” Woo said.