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Circuit City's loss widens as revenue falls

June 20, 2008|From Bloomberg News

Circuit City Stores Inc. on Thursday posted a wider fiscal first-quarter loss and a sales decline that surpassed analysts' estimates.

"I wasn't particularly impressed," Anthony Chukumba, an analyst at FTN Midwest Securities Corp. in New York, said after Circuit City reported that its net loss for the period ended May 31 widened to $164.8 million, or $1 a share, from $54.6 million, or 33 cents, a year earlier.

Analysts surveyed by Bloomberg estimated an average loss of $1.07 a share. "They beat consensus, but I think it was due more to excess pessimism than any kind of fundamental turnaround in performance," Chukumba said.

Revenue at the Richmond, Va., company fell 7.4% to $2.3 billion, below the average analyst estimate of $2.37 billion in a Bloomberg survey.

Sales at stores open at least a year dropped 11% in the quarter, a sign that Chief Executive Phil Schoonover's plan to stem market-share loss to bigger rivals Best Buy Co. and Wal-Mart Stores Inc. hasn't worked.

Circuit City gave a forecast for the current quarter that was lower than some analysts' projections and suspended future dividend payments to save cash. The company maintained its forecast for the year ending in early 2009 for sales to be "relatively unchanged." It predicted a fiscal second-quarter loss before income taxes of $170 million to $185 million. The average analyst estimate is for an 86-cent loss.

The retailer has faced pressure by investor Mark Wattles to increase its stock price. On May 9, Circuit City put itself up for sale and opened its books to Blockbuster Inc. and billionaire Carl Icahn to prepare for a possible offer. Blockbuster has said it may offer as much as $1.35 billion, pending a review of Circuit City's records.

Shares of Circuit City slid 7 cents to $3.98.

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