Circuit City Results & Comments Show Incompetence (CC, BBY)

Circuit City (NYSE: CC) has just posted its earnings, or at least its results.  The company posted a loss of $140 million from operations.

Quarterly net sales decreased 3.1 percent to $2.96 billion from $3.06 billion in the same period last year, with consolidated comparable store sales decreasing 5.6 percent.  Excluding the charges, the company lost $0.64 on an EPS basis.  First Call had estimates at -$0.31 EPS on revenues of $3 Billion.

We named Philip Schoonover as a CEO that needs to go, and the board should revolt after you read further down here on the outlook.  Cherkasky is out at Marsh-Mac, and Circuit City needs to follow the same path.

It did announce a new $1.3 Billion credit facility, but it also recorded a non-cash tax expense of $102.8 million to establish a full valuation allowance against its deferred tax assets in the domestic segment.

Philip J. Schoonover, chairman, president and chief executive officer, said: "We are very dissatisfied with our third quarter results.  We underestimated the financial impact from the disruption of our transformation work…..………. "We believe that these issues are primarily self-induced……"  What a dope.

But the outlook is for a loss, as well even though First Call had been looking for the retailer to post a gain in the Christmas quarter: "Assuming that current sales and margin trends continue for the balance of the fourth quarter of the fiscal year, the company expects to deliver a modest loss from continuing operations before income taxes for the quarter."  That is unacceptable for a retailer, even if you have a bozo CEO.  Best Buy (NYSE: BBY) is obviously kicking these guys in the teeth, and if you have been to a both stores back to back you’ll know why.

Shares are down about 15% at $5.65 pre-market and the 52-week trading range is $5.35 to $22.02.  With a $6.66 closing price yesterday you have to wonder if it was an Omen?  It’s a cold winter in the board room this morning.

Jon C. Ogg
December 21, 2007

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