Circuit City's Q2 Loss Dips To $11.2 Mil.

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Weighed down by costs associated with remodeling and relocating superstores, the Circuit City Group sustained a loss of $11.2 million in its fiscal second quarter, somewhat lower than the $12.5 million loss generated in the same three months last year. These numbers exclude the retailer's earnings attributed to the reserved CarMax Group shares.

In this year's second quarter, ended Aug. 31, costs associated with remodeling and relocating of Circuit City Superstores include expenses related to the completion of video department remodels and full-store lighting upgrades in about 200 locations, as well as the relocation of two Superstores.

Circuit City incurred $25.8 million in remodeling and relocation costs in the second quarter, up from $12.8 million in the same three months last year. The retailer expects additional remodeling expenses in the third quarter as it completes the video department remodel in about 75 Superstores, and additional relocation expenses in the second half as it moves about six additional Superstores.

Sales for the Circuit City Group in the second quarter, as reported (TWICE, Sept. 16), jumped 10 percent, reaching $2.22 billion, compared with $2.02 billion in the year-ago period. Comp-store sales also increased 10 percent in the second quarter.

"We are extremely pleased with our overall results," said CEO Alan McCollough, "particularly our strong comparable store sales growth in the first half of this year.

Big-screen televisions, particularly the digital sets performed well in the quarter, said McCollough. This re-emphasizes the importance of this new video technology as well as the service delivered by Circuit City in the more complex consumer electronics categories, he said.

Gross margin at the Circuit City Group dropped 80 basis points in the second three months, to 23.7 percent, down from 24.5 percent in the same period last year.

The lower number reflects margin pressure generated by stronger sales of commodity CE products and personal computers during the second quarter, compared with the same three months in 2001. It also underscores Circuit City's more promotional stance in traffic-driving categories, partly offset by growing sales of fully featured products such as big-screen TVs.

For the six months, the Circuit City Group business generated a loss of $12.4 million, but about half the loss of $22.1 million reported in the same period in 2001. These figures exclude CarMax earnings attributed to reserved CarMax Group shares.

Sales for the six months climbed 11 percent, hitting $4.34 billion, up from $3.89 billion year over year. Comp-store sales increased 11 percent in the first half.

Circuit City's separation from the CarMax Group is scheduled to become effective Oct. 1.

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