The nation's second largest electronics retailer, which operates more than 1,600 stores in the US and Canada, reported a loss of $16 million, or nine cents a share, in the third quarter, compared to a year ago when it posted a profit of $10.1 million, or six cents a share. The locally based chain also lowered its sales outlook for fiscal 2007 to between 8% and 9% instead of the 9% to 11% range previously expected.
"The third quarter was volatile for the company," Philip J. Schoonover, chairman, president and CEO of Circuit City Stores, Inc., said in a conference call with analysts. "While we expected significant selling price declines, the magnitude and velocity has been far more than we anticipated."
Management says it was hurt by a price drop on flat-panel televisions, which declined 50% more than expected, and a decrease in the price of plasma TVs, which dropped three times more than anticipated. Stiff competition from other electronic retailers, including Wal-Mart, also hurt sales, which increased about 7% to $3.1 billion, up from $2.9 billion in the prior year's third quarter.
That growth was due in part to a 5.1% gain in sales at stores open more than one year, the company said. Strong domestic demand for flat-panel televisions and digital imaging and gaming products helped fuel that growth. The sales results marked the first time in the last six quarters that the company did not meet Wall Street expectations.
Despite the disappointing results, Circuit City said it plans to continue its expansion plans with the opening of between 60 and 65 new Superstores in the next fiscal year. In the third quarter, the company added eight Superstores and five outlets to its lineup.
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