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Circuit City Earnings Fall

Margins shrink as it sells more hardware, fewer digital satellite systems.
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Sales and earnings fell in the fourth quarter at troubled electronics retailer

Circuit City

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, as the depressed economy plus the cost of changing the way it pays sales clerks took a toll.

Richmond, Va.,-based Circuit City suffered considerable gross margin deterioration in the fourth quarter because of higher sales of less-profitable merchandise like entertainment software. Conversely, the company had weaker sales of wireless communications products, digital satellite and of extended warranties.

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For the quarter ended Feb. 28, the company had earnings from continuing operations of $75.3 million, or 36 cents a share, compared with $140.9 million or 67 cents per share. The latest quarter matched analysts' expectations. Discontinued operations comprise the company's former


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The company recently stopped paying its sales clerks by commission, a move that ended up reducing earnings in the latest quarter by $10 million, or 3 cents a share. That's made up of severance costs of $14.2 million, or 4 cents a share, and other costs of $1.6 million, or 1 cent a share, offset partially by payroll savings of $5.8 million, or 2 cents per share.

Total sales for the fourth quarter ended Feb. 28, 2003, fell 5% to $3.19 billion from $3.36 billion. The gross profit margin was 23.9% in the fourth quarter, compared with 24.3% a year ago.