Circuit City comps show sharp fall - comparable store sales; financial issues lead to stock price fall - Brief Article

DSN Retailing Today, March 6, 2001

RICHMOND, VA. -- Circuit City's stock price plunged 16% on March 6, following disappointing fourth quarter financial results and a grim forecast for the next six months.

The CE retailer based in Richmond, Va., reported total sales of $3.18 billion for the quarter ended Feb. 28, 2001, a 9% drop from the same period last year. Comparable store sales dropped 11% for the quarter, but were down only 2% when excluding home appliances--a category the retailer stopped carrying in the third quarter. Weak computer sales were cited as part of the reason for the overall decline.

More troubling were reports that same store sales at Circuit City fell 20% in January and February and are expected to maintain a 20% decline for the next six months. Company executives expect sales to improve during the third quarter and eventually post a single-digit increase in the fourth quarter.

Circuit City's price per share fell $2.60 on the day of the announcement to $13.34. Investors were scared off even though the retailer expects earnings of 47 cents per share for the quarter, which would better Wall Street estimates by one cent.

Analysts were predictably pessimistic about Circuit City's prospects for the coming year. David Schick, an equity analyst with Robinson-Humphrey in New York, described Circuit City's situation as "increasingly confusing and currently devoid of catalysts." Deutsche Banc Alex. Brown Inc. downgraded Circuit City from market performer to market underperformer based on fourth quarter results and "precipitously worsening top-line prospects."