, long criticized on Wall Street for leaning too much on its credit card division for profitability, will explore the sale of that operation after it produced a $22 million pretax loss in the latest quarter and played a role in a 30% reduction in cash.
The company, which said its loss widened to $43.9 million, or 21 cents a share, from $1.3 million, or 1 cent a share, in the first quarter, also hired a new chief financial officer ahead of the retirement of Michael T. Chalifoux. Sales fell 9% to $1.93 billion while same-store sales plunged 10%.
The loss at the finance division reflected costs, writedowns, and allowances related to several credit card receivables securitizations, as well as a second straight quarter in which it was forced to lower the valuation of an interest-only strip derivative it owns.
On its balance sheet, accounts receivable swelled to $181 million from $146 million, while retained interest in securitized receivables rose to $763 million from $416 million. The company had cash and cash equivalents of $615.6 million at quarter's end, down from $884.7 million the previous quarter and $1.11 billion a year ago, reflecting the higher retained interests in securitized receivables, higher accounts receivable and reductions in accounts payable.
"Given the recent performance of the bankcard operation, the board has authorized management to analyze all viable options for that operation," the company said in a statement.
The company said gross margin was 23.2% in the quarter, compared with 24.2% a year ago, reflecting competitive pricing, a reduction in extended warranty sales, and shifts in the merchandise mix.
"Significant declines in average retails, driven by our industry's rapid technological development, and economic weakness, particularly early in the quarter with the onset of the war with Iraq, were the key contributors to the first quarter sales weakness," the company said. "We were encouraged that the sales pace improved in May when we faced our toughest prior year comparable store sales comparison. Nevertheless, we recognize that we must continue our efforts to improve the shopping experience for Circuit City customers."
The new CFO is Michael E. Foss, formerly of