By Lisa Johnston
New products on display at the American International Toy Fair, held in N
Overall fourth-quarter net earnings from continuing operations at Circuit City during the fiscal fourth quarter declined to $82.5 million, compared with $94.7 million in the same three months last year.
This includes after-tax costs of $30 million, after-tax expense reduction of $4.4 million, after-tax expense of $4.2 million and after-tax gain of $1.8 million — all in the fourth quarter — compared with after-tax costs of $28.3 million and an after-tax benefit of $3.7 million, in the fourth quarter of the previous year.
Total net earnings in the fourth quarter, ended Feb. 28, declined to $85.4 million, down from $89.6 million in the same three months a year earlier.
Circuit City U.S. store sales in the fourth quarter were flat at $3.3 billion, with comps down 1.8 percent, as reported. Overall fourth-quarter sales climbed 5.3 percent in the three months, reaching $3.5 billion, up from a year-ago $3.3 billion. Comps, again, decreased 1.8 percent.
Earnings from continuing operations before income taxes for the U.S. stores segment in the fourth quarter decreased to $113.3 million from a year-ago $149.1 million. For the 12 months, this figure came in at $63.4 million, compared with a loss of $1.2 million year-over-year.
However, Circuit City recorded higher fiscal-year sales and earnings, with overall sales rising 6.2 percent to $10.5 billion, and comp-store sales edging upward 0.7 percent. U.S. stores segment sales hit $10 billion in the fiscal year, up from a year-earlier $9.9 billion.
Overall net earnings from continuing operations for the 12 months jumped to $59.9 million, moving Circuit City into the black for the fiscal year. The previous year, the retailer reported a loss from continuing operations of $787,000. Total net earnings for the 12 months reached $61.7 million, compared with a loss of $89.3 million the previous year.
“Our sales and earnings performance showed improvement over the prior year as the company returned to profitability for the fiscal year,” said Alan McCollough, chairman/CEO. “We are pleased that our efforts to first stabilize and then grow gross profit margin generated improvements during the year, while we continued to rationalize our cost and expense structure.”
In a conference call, the company said it plans to improve relevancy with the customer through more effective advertising and promotions, and an expanded movie and video game offering. The chain will also make significant investments in IT to enhance customer service, to better manage inventory and pricing, and to sharpen its sales forecasting in order to reduce markdowns and out-of-stocks. As part of the outlay, the chain will install a new checkout system within the next two years.
Overall gross profit margin in the fourth quarter hit 24.4 percent, compared with 23.8 percent in the same three months the previous year.
The U.S. store segment, alone, saw a gross profit margin decrease of a bit over 1 percent in the fourth quarter, reflecting lower store merchandise margin due to low-price promotions on DVD players, large analog TVs and home theater in a box; no-interest financing on flat panel displays; and year-end clearance efforts.
This was partially offset by the increase in extended warranty sales, which hit $119.4 million in the fourth quarter, up from a year-over-year $100 million.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.