Circuit City Lowers its Earnings Forecast

Circuit City Stores (Richmond, Va.) announced that it was lowering its profit outlook for the quarter ending November 30. It's the third time this year that the electronics retailer had announced a drop in expectations, and it raised serious doubts about the company's holiday prospects. As a result of the announcement, investors dumped shares not only in Circuit City Stores but also in its chief competitor, Best Buy Co. (Minneapolis).

Circuit City ceo Alan McCollough said, in making the announcement, that a sales fall-off had been expected in August and September, as the company carried out the plan, announced in July, to stop selling appliances and conducted a large-scale remodeling of its stores. But, he said, “what we believe we're seeing is a slowdown that's not explicable by what's going on in our remodeling process.”

McCollough asserted that product trends had remained unchanged and that sales of digital versions of camcorders, satellite systems and advanced TVs were continuing to grow. But, he said, “there's been a broad notch down across the board.”

A Best Buy spokesperson responded that the company still expects same-store sales to grow for its third quarter, though she acknowledged that November would be crucial for the electronics retailing industry because it marked the start of the holiday shopping season. Stores are well-stocked in anticipation of a strong holiday performance.

An analyst remarked that stores like Circuit City and Best Buy were being squeezed by the low-price warehouse retailers, which frequently offer lower prices and more convenient locations. On the other hand, RadioShack today announced a nearly 30 percent earnings increase for the current quarter.