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Circuit City Posts $43.9-Million Loss

June 18, 2003|From Bloomberg News

Circuit City Stores Inc. said its fiscal first-quarter loss widened to $43.9 million after sales slumped for a second consecutive quarter and costs at the company's credit card unit climbed.

The retailer's shares surged 13% after Circuit City, based in Richmond, Va., said it will consider options for the money losing bank card operations, including a sale.

Sales at stores open at least a year dropped 10% as the economy slowed and Circuit City lost customers to larger rival Best Buy Co. Investor optimism was bolstered when the company said Chief Executive Alan McCullough may sell the company's bank card unit, part of a finance unit that posted a loss of $22.1 million in the quarter.

The net loss was 21 cents a share, wider than the loss from continuing operations of $1.3 million, or 1 cent, a year earlier, Circuit City said. Sales in the three months ended May 31 fell 8.7% to $1.93 billion.

Circuit City had been expected to lose 24 cents, according to analysts surveyed by Thomson First Call. Analysts revised their estimates two weeks ago after the company forecast a loss of as much as 25 cents a share.

Shares of Circuit City rose 92 cents to $7.79 on the New York Stock Exchange. The stock had lost half its value in the last year.

Circuit City split off its CarMax Inc. used-car business in October. Profit from discontinued operations in the year-earlier quarter was $29.2 million, or 28 cents a share, making net income $28 million, or 27 cents.

The credit card business posted the loss in part because of higher transaction costs and a decline in the value of some receivables that were bundled and sold as securities. Circuit City retained a higher percentage of the underlying debt under new agreements with the securities firms.

Most retailers contract for credit card services. Increasing customer credit card payment defaults helped push Spiegel Corp., a catalog merchant, into bankruptcy protection, while other companies such as Sears, Roebuck & Co. have placed their credit card operations up for sale.

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