Circuit City sees first sales loss in three years

After Best Buy Co. Inc.'s (NYSE: BBY) disappointing quarterly results yesterday, competitor consumer electronics retailer Circuit City Stores (NYSE: CC) was expected to do even worse this morning when reporting results from its most recent quarter. Well, Circuit City did not disappoint and reported a $55 million loss this morning after sales at its U.S. stores fell for the first time in three years.

Circuit City's loss of $0.33 per share was a steep change from the year-ago profit of $0.04 per share as sales slipped about 4.3% to $2.49 billion for the quarter that ended on May 31. With Circuit City disappointing these past several quarters and with the current slashing of headcount and store count, can this ailing electronics behemoth get back on track? All those cost savings from these personnel and store changes should help, but Circuit City has more work to do beyond that throughout 2007.

Wal-Mart's commitment to enter the consumer electronics arena in a heavier fashion is not good news to Circuit City, which has its hands full just trying to compete with larger rival Best Buy these days. With CC shares sitting at $16.07 at the close of the market yesterday, that figure represents a decline of about 15% in 2007. And it seems poised to head even lower today as shares are down 2.6% in pre-market trading (9:16 a.m.).

Circuit City shareholders are probably a tad angry, although seasonal shifts and larger-than-expected pricing fluctuations (for the worst) in the red-hot flat-panel television market have jilted Circuit City around a bit this year (and during the last part of 2006). It may come as some relief that Best Buy cut its profit outlook for the year yesterday as well, so Circuit City can at least have a fleeting smile before the turnaround work carries on.