Best Buy, Circuit City Heading In Opposite Directions
Two days after Best Buy reported solid financial results and claimed market-share gains in the U.S., Circuity City reported a $164.8 million loss, forecast a wider second-quarter loss compared with the year-ago period and suspended dividend payments to shareholders as a means to save money.
Circuit City Stores shares fell slightly Thursday after the company reported the loss, about $1 per share, on $2.3 billion in sales for its first fiscal quarter ended May 31.
In a statement, Philip Schoonover, chairman, president and CEO of Circuit City Stores, said, "We are rebuilding our selling culture and focusing on creating a good first and last impression with the customer. We have seen improved trends in our store close rate and in our services and accessories attachments."
In the year-ago quarter, Circuit City lost $54.6 million, or 33 cents per share, on $2.49 billion in sales. Overall, sales fell 7 percent, while sales at stores open last year fell 11.3 percent.
Meanwhile, Best Buy topped Wall Street estimates and earned $179 million, or 43 cents per share, on $8.99 billion in sales for its first fiscal quarter ended May 31, 2008. So it appears the financial gap between the two companies is widening.
Earlier this year, Circuit City received a takeover offer from Blockbuster Inc. The movie rental company is still examining a merger.
"As we previously announced, the board of directors is leading a process to explore strategic alternatives to enhance shareholder value, and that review continues," Schoonover said in the statement.
Circuit City's board filed a shelf registration statement with the Securities and Exchange Commission to get greater flexibility to respond to strategic opportunities, he added.
"In addition, the board of directors has suspended future dividend payments. We continue to believe that we have adequate liquidity to fund our turnaround but would prefer to conserve capital," Schoonover said in the statement. "Crisp execution of our retail turnaround efforts remains our primary focus. The outcome of those efforts will position Circuit City well for the future and help us to capitalize on the anticipated improvement in the macroeconomic climate during the second half of the fiscal year."