Company News: Circuit City cites loss
RICHMOND, Va. – Consumer electronics retailer Circuit City Stores Inc. said Tuesday it swung to a loss in the third quarter as deep discounts on flat-panel televisions and computer hardware and software cut into profit margins. It also lowered its full-year sales outlook and shares fell more than 16 percent.
The nation’s second biggest consumer electronics chain after Best Buy Co. reported a loss of $16 million, or 9 cents per share, in the three months ended Nov. 30. Analysts polled by Thomson Financial were looking for a profit of 5 cents per share.
A year ago, Richmond-based Circuit City earned $10.1 million, or 6 cents per share.
Sales rose about 7 percent to $3.1 billion from $2.9 billion last year but fell slightly below Wall Street’s forecast for $3.12 billion. The company had exceeded analysts’ expectations for the five previous quarters.
Sales at stores open at least a year, considered a key indicator of retail strength, rose 5.1 percent.
Circuit City cut its fiscal 2007 sales forecast, citing expectations of continuing pressure on gross margins caused by heightened competition, and now expects growth of 8 percent to 9 percent instead of the 9 percent to 11 percent previously forecast. Same-store sales are expected to grow by 6 percent to 7 percent, not the 7 percent to 9 percent previously forecast.
Circuit City shares fell $3.75, or 16.5 percent, to close at $19.01 on the New York Stock Exchange.
In other company news:
“Faced with tough new competition, Palm Inc. reported Tuesday a sharp drop in its fiscal second-quarter profits and revenues but exceeded Wall Street’s lowered expectations.
The maker of Treo smart phones said it earned $12.8 million, or 12 cents per share, in the quarter ended Dec. 1. That compared with $260.9 million, or $2.51 per share, in the year-ago period, which included a tax-related gain of $226.3 million.
Revenue fell nearly 12 percent to $392.9 million, compared with $444.6 million in the year-ago period.
“Morgan Stanley Inc., the second-biggest investment house on Wall Street, said Tuesday it will shed its Discover credit-card business in a bid to pump up shareholder value.
Morgan Stanley – which also reported Tuesday that its full-year profit rose 51 percent to $7.45 billion in 2006 – said it will spin off Discover sometime next year. The transaction will be as a 100 percent tax-free dividend to shareholders, with no ongoing ownership retained by Morgan Stanley. The company said Discover has about $5.2 billion in equity.