Circuit City Posts Steep Q3 Losses
Schoonover "very dissatisfied" with third-quarter results
by Alan Wolf -- TWICE, 12/21/2007
Richmond, Va. — Circuit City reported earnings losses and sales declines for its fiscal third quarter, attributed to disruptions caused by this year’s company-wide restructuring.
Net losses from continuing operations were $208 million for the three months ended Nov. 30, compared to a net lost of nearly $20 million for the year-ago period.
Total sales slipped 3.1 percent to just under $3 billion and consolidated comparable store sales fell 5.6 percent. Domestically, net sales declined 3.6 percent to $2.8 billion and comp store sales fell 5.8 percent.
The consolidated gross profit margin was 19.1 percent compared with 22.1 percent last year and the domestic gross profit margin decreased 331 basis points, driven by decreases in TV margins, extended warranty net sales and PC hardware margins as well as a greater mix of PC hardware sales.
The domestic segment’s sales, general and administrative (SG&A) expense-to-sales ratio increased 49 basis points, primarily reflecting the overall de-leveraging impact of lower sales and higher costs related to new store openings and the relocation and remodeling of older units. The increase was partially offset by a decrease in compensation costs.
“We are very dissatisfied with our third-quarter results,” said Phil Schoonover, Circuit City’s chairman, president and CEO. “We underestimated the financial impact from the disruption of our transformation work, which contributed to lower close rates, reduced attachments of higher margin accessories and firedog services and lower extended warranty net sales as compared with the prior year.”
Schoonover said the problems were primarily self-induced and fixable, as demonstrated by the company’s double-digit comp-store sales increase over Thanksgiving weekend and monthly improvements in its TV attachment basket after bottoming out in August.
“Looking ahead, we will focus on execution and slow the rate of change in our business to refine and master the necessary work we completed this year,” Schoonover continued. “Our team is motivated, passionate and dedicated to improving our top and bottom line results in an effort to enhance value for all Circuit City stakeholders.”
