Circuit City's Q4: Surprise of the Morning

Circuit City (CC) provided an early morning surprise, reporting better-than-expected results for its fiscal fourth quarter ended February 29. (See transcript.)While revenues were a bit lighter than expectations - $3.65 billion, below the Street at $3.79 billion - the company posted 10 cents a share in EPS, beating its guidance of a modest pre-tax loss. The Street had expected a per-share deficit of 7 cents.

The company is not out of the woods yet, however. Comp store sales were down 11.3% in the quarter, with overall domestic sales down 8.8%. For the fiscal first quarter ending in May, the company sees a loss from continuing operations before income taxes of $180 million to $195 million. For the February 2009 fiscal year, Circuit city sees sales flat with the $11.7 billion reported for fiscal ‘08, which is below the Street consensus of $12.34 billion.

Circuit City said that despite “the toughest macroeconomic environment in years,” it “stopped the declining trends in close rate, services attachments and warranty units.” The company said it expects continued sequential and year-over-year improvements in these metrics.

The company said it continues to look for strategic alternatives for InterTAN, its international segment, but so far hasn’t made a decision on what to do with the unit.

Circuit City said it saw a single-digit drop in overall TV sales, as weakness in projection and tube TVs more than offset a double-digit increase in flat-panel TVs. Desktop computers declined double digits, but notebooks increased by low single digits. Navigation products were up “strong double digits,” but there were comparable large declines in portable digital audio, home audio and digital satellite radio. Video game software was up high single digits, but there were double-digit declines in music and video software.

Circuit City this morning was up 30 cents in early trading, or 6.6%, to $4.83.

Comments

[Patrick M:]

Fascinating. Doesn't this show that these retails just make a ton of money from warranties and service? Revenues were horrible, sales were horrible, but warranty sales were strong so CC beat numbers...

2008 Apr 09 11:35 AM

[Patrick M:]

More on the warranty issue: here's what CC said on their last conf call about warranties:

seekingalpha.com/artic...

2008 Apr 09 11:37 AM