Circuit City Set Aflame

With Circuit City's weak positioning, rival Best Buy(BBY Quote) could emerge as a winner. Best Buy reported a 52% climb in third-quarter profit earlier this week, helped in part by a calendar shift.

In comparison, Circuit City's results were disastrous. The company reported a loss of $207.3 million, or $1.26 a share, widened from $20.4 million, or 12 cents a share, a year earlier.

The bottom line was in part weighed down by a $102.8 million charge to establish a valuation allowance for deferred tax assets. Excluding the charge, the loss was 64 cents a share, still well worse than analysts' expectation of 31 cents, based on Thomson Financial's mean estimate.

Sales fell to $2.96 billion from $3.06 billion the prior year, missing analysts' target of $3 billion. Same-store sales, or sales at stores open at least a year, dropped 5.6%.

The company's consolidated gross profit margin slid to 19.1% from 22.1% a year earlier. Circuit City said the decline was driven by drops in television margins, extended warranty sales and PC hardware margins.

Earlier this year, the company announced a sweeping restructuring, with one of its plans involving the layoff of 3,400 employees in favor of lower-paid workers. Analysts say that has come back to bite the company as inexperienced staff results in weaker levels of customer service and disorder in its stores.