Circuit City Loss Widens in Quarter

Circuit City Stores Inc. said Friday that its fiscal first-quarter loss more than doubled to $13.1 million, reflecting costs of revamping stores and a drop in sales of computers and DVD players.

The 7-cent-a-share loss was greater than analysts expected, widening from $5.94 million, or 3 cents, a year earlier. Sales in the three months ended May 31 rose 6.4% to $2.23 billion, Richmond, Va.-based Circuit City said.

Circuit City had pretax costs of $16.8 million for an inventory write-down at its Canadian unit and payments to consultants related to the relocating and overhauling of some U.S. stores. Circuit City, which trails No. 1 Best Buy Co. in revenue growth, said sales at older stores were unchanged. Shortages of some models hurt computer sales.

“They’ve got a long way to go in their turnaround,” said David Campbell Jr., a Thompson, Davis & Co. analyst. “It’s pretty disappointing Circuit City can’t compete better with Best Buy. They’re continuing to lose market share.”

Shares of Circuit City fell 72 cents, or 4.1%, to $16.93. They got a boost in February from a takeover bid of $17 a share by Highfields Capital Management that the retailer rejected a month later.

Circuit City, which has more than 600 U.S. stores and 1,000 in Canada, was expected to report that its loss narrowed to 2 cents a share, the average estimate of analysts surveyed by Thomson First Call.

Sales of DVD players and desktop computers declined more than 10%. Notebook computer sales fell at Circuit City even as they rose more than 10% at Best Buy, which has had bigger sales gains for at least five years.

Sales of flat-panel televisions more than doubled at Circuit City after the retailer added a larger assortment of plasma-screen sets. Sales of digital music players such as Apple Computer Inc.’s iPod also rose.

Circuit City Chief Executive W. Alan McCollough said that $4.9 million in pretax costs for consulting services would improve merchandise tracking and marketing. The company had costs of $11.9 million related to plans to convert its Canadian InterTan stores, which have been licensing the RadioShack name and will be renamed the Source.

“We understand we will have a lot of work ahead of us,” said McCollough. “We believe we are making progress.”