RICHMOND, VA. -Circuit City cited sharp pricing, sales disruptions due to store remodels, and bargain hunting by consumers for a 7 percent decline in third quarter sales, prompting it to alert investors to the probability of a stiff earnings shortfall for the period.
Revenue fell to $2.3 billion for the three months ended Nov. 30, from $2.5 billion last year, while comparable-store sales dropped 10 percent for the quarter.
President/CEO Alan McCollough said that despite a record-busting Black Friday, "gross profit margins and sales were below our expectations across most categories for the quarter" due to "especially promotional pricing" over the Thanksgiving Day weekend as "consumers were attracted to the lower-margin products."
Between that, majap markdowns and higher-than-anticipated remodeling costs for its fully renovated Florida stores, he said, the company's retail unit expects to post stiff losses for the quarter of 33 cents to 35 cents per share.
In a conference call with investors, McCollough defended the chain's move out of majaps, noting that sales volume for the quarter "would have been worse" had white goods not been supplanted by expanded selections of software, computer peripherals and video games.
The news sent the company's shares to their lowest level in some six-and-a-half years. The stock was off $3-3/16, or 25 percent, to $9-9/16 in the hours following the announcement.
By contrast, competitors Best Buy and RadioShack enjoyed an early wave of holiday-buying frenzy. The former reported a nearly 6 percent gain in same-store sales for the third quarter ended Nov. 25 on top of last year's 9 percent rise, while the latter saw its November comps grow 12 percent over last year's record 17 percent gain.