Circuit City Set Aflame
Updated since 9:31 a.m. EST
SAN FRANCISCO -- In a holiday season that is expected to be led by consumer electronics, Circuit City (CC) says it will see a loss in its fourth quarter.
That disappointing forecast, along with a dreadful third-quarter report, sent shares of the country's second-largest electronics retailer plunging 25% Friday afternoon.
Circuit City reported a much worse-than-expected loss for the third quarter, with sharply lower sales and weakened margins. The retailer blamed the shortfall on its ongoing "transformation" efforts -- which have yet to transform the company."Circuit City's internal restructuring efforts appear to have gotten the better of its financial performance," wrote Goldman Sachs analyst Matthew Fassler in his research. "In our view, the company leaned on self-inflicted disruption from its 'transformation' process." Indeed, even Circuit City's own executives admit that they brought their problems upon themselves. "We are very dissatisfied with our third quarter results," said Philip Schoonover, chairman, president and chief executive of the company. "We underestimated the financial impact from the disruption of our transformation work, which contributed to lower close rates, reduced attachments of higher margin accessories and firedog services and lower extended warranty net sales as compared with the prior year." Circuit City now expects a "moderate" loss in the fourth quarter, which includes a crucial holiday shopping season that will largely be driven by consumer-electronics sales. Analysts had expected earnings of 56 cents a share.
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