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Circuit City Earnings Off In Q4

Richmond, Va. — 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. We are making progress in improving operations, but we also recognize that more work remains to improve our relevancy with the customer,” said McCollough.

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 competitive promotions on DVD players, large analog TVs and home theater in a box, as well as 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. For the 12 months, extended warranty sales jumped to $379.4 million, compared with $325.5 million the previous year.

For the year, overall gross profit margin was 24.5 percent overall, compared with 23.2 percent 12 months earlier. U.S stores climbed less than 1 percent in the period.

Overall expenses for the three months jumped to $715.3 million, compared with a year-ago $635.8 million, while for the 12 months, expenses increased to $2.5 billion from a year-earlier $2.3 billion. Expenses were 20.6 percent of total sales in the fourth quarter, compared with 19.3 percent in the same period last year. For the 12 months, expenses hit 23.5 percent of total sales, up from 23.1 percent year-on-year.