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.”
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Excuses, excuses. Every quarter there's something new: Too many 1080p flat panels, disruptions with the turnaround strategies, implementation delays with new store operating systems, blah blah blah. Let's just face it squarely: Your business model doesn't work. Now the latest problem is that poor locations contribute to the company troubles, and it will take years to relocate all the stores that need it. Just pull the plug. You've already alienated customers with the poorly trained staff now in place.
Bill Penn - 2007-24-12 11:45:00 EST -
Dear Phil. Please call Rick Sharp. He will fix it for you.
P.Farinelli - 2007-23-12 09:55:00 EST -
Now is the time to by the stock! Each of the last CEOs has presided over a
decline in share price followed by a miracle turnaround culminating in his
retirement with millions. Rick got his. Alan did quite well, too. This is
Phil's turn. And who said grifting was dead.
Prediction: the stock will triple in value in the next 24 months. Ka-ching!
Ray Lepper - 2007-21-12 18:17:00 EST -
That's special!!! I wonder how much the newly announced "CC reserve fund" will be? You know, the fund that will be set aside to BRIBE any CC executive to stay with the company when they decide they've done enough harm to CC and start looking at new jobs. Now, we can all look forward to the next massive-profit-loss article that will be about the other CE giant who screwed over the employees who helped to build the company. And that CE giant is, yup, you guessed it, TWEETER! Let both companies die as far as I'm concerned!!!!
Former Tweeter Employee - 2007-21-12 17:04:00 EST -
Hey Phil,
Maybe you would have had a chance if Circuit City hadn't dumped all it's good retail people, and then unethically over-rewarded the corporate "fat cats."
Nothing will save them now.
Circuit deserves what is now inevitable !!
When will they ever learn?
KCH
Old school audio man - 2007-21-12 11:37:00 EST
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