Circuit City Stores Inc., which has laid off workers and closed stores in an effort to cut costs, says it expects to post a first-quarter loss because of poor big-screen TV sales and is withdrawing its earnings outlook for the first half of the fiscal year.
The electronics and entertainment retailer said it now expects a loss from continuing operations before income taxes of $80 million to $90 million for the first quarter of its 2008 fiscal year because of “substantially below-plan sales,” especially of large flat-panel and projection televisions.
Circuit City also said it was withdrawing its outlook because of “uncertainties in the current operating environment.”
The company had said its revenue would grow 5 percent to 8 percent — with comparable-store sales rising 3 percent to 5 percent. The company had also anticipated a pretax loss of $40 million to $50 million in the first half of fiscal 2008, largely because of continued restructuring costs.
Circuit City shares fell $1.40, or 8 percent, to $16.05 in extended trading following the announcement after markets closed Monday. In the last 52 weeks, the stock has ranged from $17.02 to $31.54.
President and Chief Executive Philip J. Schoonover said the company is “moving with increased urgency” to accelerate its restructuring efforts.
“Although the first half of the fiscal year will be volatile due to the change in the television business, we believe that our transformation efforts will yield positive results for the full fiscal year,” Schoonover said in a statement.
Circuit City, facing larger competitors and falling sales, said in March that it would immediately lay off 3,400 high-paid workers and replace them with lower-paid new hires as part of a cost-cutting plan. The Richmond-based company has also said it is closing seven domestic stores, a Kentucky distribution center and 62 company-owned stores in Canada.
Circuit City has long struggled for market share against Best Buy Co., and analysts have said each of Best Buy’s locations bring in about twice as much revenue as its smaller rival. Both have seen fierce competition from Wal-Mart Stores Inc., which has lowered prices for key products such as flat-panel televisions, forcing Circuit City and Best Buy to follow suit.
In a research note Monday, analysts at Stifel, Nicolaus & Co. said Best Buy, the nation’s No. 1 electronics retailer, has “significant competitive advantages” and is “well positioned to take business from both Circuit City’s operational changes and closed Tweeter and CompUSA stores.”
Tweeter Home Entertainment Group Inc. said last month that it is closing 49 of its 153 stores and laying off about 650 workers. The company’s president and CEO, Joe McGuire, noted then that holiday sales were poor, largely due to ongoing TV price cuts at larger chains.
CompUSA Inc., which recently has been emphasizing selling high-definition televisions and other home-electronics and entertainment gear, said earlier this year it was closing 126 stores as part of a restructuring, leaving 103 stores in 39 states.
Circuit City on Monday also restated results from the fourth quarter and its full year 2007 report because of an increase in vendor allowances. It also revised third- and fourth-quarter results to correct the timing of revenue from sales on its Web site.
For the company’s third quarter, which ended Nov. 30, the retailer said its net loss is now $20.4 million, or 12 cents per share. The company had reported a third-quarter loss of $16 million, or 9 cents per share.
For the fourth quarter, which ended Feb. 28, Circuit City said its net loss is now $4.3 million, or 3 cents per share. Previously, the company had said it had a loss of $12.2 million, or 7 cents per share.
For the full 2007 fiscal year, the retailer now says it had a loss of $8.3 million, or 5 cents per share. Circuit City had previously reported a loss of $11.8 million, or 7 cents a share, for the year.
Circuit City operates about 650 stores in the U.S., along with 510 retail stores and 296 dealer outlets in Canada through its InterTAN subsidiary. The company also sells its products and services online.