Sales, Carmax Drag Down Circuit City Earnings

Circuit City Stores Inc. said its fiscal third-quarter earnings will fall below analyst’s expectations because of poor sales in November and losses at its CarMax chain of used-car dealerships.

The largest U.S. operator of electronics and appliance stores said it expects to report earnings of 14 cents a share for the quarter ended Nov. 30. Analysts expected it to post 17 cents a share, the average estimate of 14 analysts polled by IBES International Inc.

Circuit City said it was being hurt by wider-than-expected losses at its CarMax business and costs of developing Digital Video Express, which will sell films on digital video disk in ventures with major studios. CarMax Group operates used-car stores in the southeastern U.S.

On Thursday, Circuit City Group shares fell 1/4 to 32-5/8, and CarMax fell 9/16 to 10-5/8. Circuit City closed the week at 32-1/2 and CarMax at 9-15/16. Circuit City created the CarMax shares earlier this year to track the performance of the used-car business.

Even excluding the Digital Video Express costs and the loss at CarMax, third-quarter earnings will be unchanged from the year-ago quarter’s 26 cents a share, the company said. Digital Video Express will cut earnings by about 5 cents, and CarMax by about 7 cents, it said.

Same-store sales, or sales at stores open at least a year, for the Circuit City appliance stores fell 3 percent in November, while CarMax same-store sales were unchanged. Same-store sales are considered the best measure of a retailer’s performance because they exclude the effect of store openings and closings. For the quarter, total sales rose 15 percent to $2.14 billion from $1.86 billion. Same-store sales at the Circuit City electronics chain fell 2 percent and CarMax same-store sales rose 4 percent.

Circuit City said it expects CarMax will be profitable in the next fiscal year.

The Richmond, Virginia-based company will report third-quarter earnings in mid-December.

Some of the stocks that moved substantially or traded heavily Friday:

NYSE

Pierce Leahy, down 6-9/16 at 15-7/16.

The records-management company warned that its 1998 profits would be lower than analyst estimates because of higher expenses. The warning prompted a stock downgrade from Merrill Lynch.

Fleet Financial Group, up 1-3/8 at 71-13/16.

Boston-based Fleet sold sold 10.7 million shares for $70.37-1/2 apiece in a public offering, raising $752.9 million for general purposes and to acquire the credit card business of Advanta Corp.

NASDAQ

Ascend Communications, up 2-1/16 at 28-15/16.

The Alameda, Calif-based maker of telecommunications networking products said Thursday it expects its earnings for the fourth quarter to meet Wall Street’s expectations.

3Dfx Interactive, up 4-15/16 19-1/16.

The computer graphics company said fourth-quarter sales growth will be at least double its original expectations of a 40 percent increase from the third quarter’s $10 million. 3Dfx is based in San Jose, Calif.

Kemet, down 2-5/8 at 20-5/8.

The electronics components maker was downgraded by Merrill Lynch and BT Alex. Brown because of concerns about about material prices and the effects of the Asian fiscal crisis on demand. Kemet is based in Simpsonville, S.C.

AMEX

Trans World Airlines, up 1-1/2 at 10-15/16.

Trans World Airlines warrant, up 1-3/8 at 6-1/8.

The airline was upgraded by BT Alex. Brown to “buy” from “neutral.” BT Alex. Brown analyst William Wrightson said the cash-strapped company has raised enough financing to complete its turnaround, the Dow Jones News Service reported.