billddrummer

Circuit City Earnings: The Devil Is Always in the Details

Well done. It's interesting how the company is projecting a $185 million loss for the first quarter of this year when they were crowing about 'improved execution' and 'being on the right path' with regards to the turnaround. Fact is, with a 20% gross margin, to get to breakeven, they have to reduce their fixed costs by another $200 million on top of the existing $200 million they say they've saved. Only way to do that is to close more stores. The City concept is a good one if only because fixed costs are lower for smaller footprints. But this company looks more like Radio Shack than Best Buy if that's the direction they're moving. No hope. And if you look at interest income, it's down by 29% quarter to quarter, 33% lower year over year. What that means to me is that the company is burning through its cash hoard, which signals draws on the new credit line in the third quarter to ramp up inventory for the holiday season. By the end of that quarter, they'll have very little cash and a lot of debt. One of the props for the stock price was cash/common share. That number is going down every day. Soon it will be a narrower current ratio. And the final chapter is illiquid inventory.

If this is an 11 page book, with the demise of CC at the end, we're mid-way through chapter 8 now. Chapter 11 is the final one.