Deja Vu: Like Best Buy, Circuit City Earnings Hurt By Unfavorable Sales Mix

Jun.20.07 | About: Circuit City (CCTYQ)
Circuit City withdraws earnings forecast:

Consumer electronics retailer Circuit City Stores Inc. (NYSE:CC) on Wednesday posted a quarterly loss that it called disappointing and withdrew its earnings forecast, citing a drop in television sales and an uncertain economic environment.

In other words, “how should we know what our sales will be?”

The company reported a loss of $54.6 million, or 33 cents a share, from net income of $6.4 million, or 4 cents per share, for the fiscal first quarter. Analysts, on average, had been expecting a loss of 32 cents a share, according to Reuters Estimates.

After Best Buy’s (NYSE:BBY) report yesterday, the causes are not particularly surprising:

The company said its profit margins fell due to a drop in domestic sales of extended warranties and on increased sales of lower-margin personal computers.

Circuit City said total television comparable store sales decreased sharply, as a significant drop in projection and traditional tube televisions more than offset growth in flat-panel televisions.

Given that flat panel televisions cost several times as much as a traditional tube television, that must have been some drop-off. The positive way of looking at this is that people want the higher-end televisions and are simply holding off on all TV purchases until they can afford one. The negative way of looking at it is that it may take quite a while before that happens.

CC 1-yr chart:

CC 1-yr chart