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Weak Results Scorch Circuit City

Shares plunge after the retailer posts a steeper-than-expected loss.
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Updated from 9:28 a.m. EDT

Circuit City


shares plunged 19% Thursday after the electronics retailer posted a worse-than-expected loss and warned of more weakness to come.

The results highlight Circuit City's ongoing troubles in losing market share and keeping up its profit margins, and they stand in stark contrast to those of its thriving larger rival,

Best Buy



For the second quarter ended Aug. 31, Circuit City swung to a loss of $62.8 million, or 38 cents a share, from a year-earlier profit of $10 million, or 6 cents a share.

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Sales fell to $2.64 billion from $2.82 billion. Same-store sales, or sales at stores open at least a year, tumbled 7.9%.

Analysts polled by Thomson Financial anticipated a loss of 12 cents a share and sales of $2.78 billion.

In addition to the sales drop, the bottom line was hit by a 313-basis-point decline in gross margins. Circuit City attributed the drop to a decrease in sales of extended warranty products, a greater mix of PC hardware sales and lower margins for hardware and televisions.

Circuit City has been struggling sliding profit margins and market share losses to Best Buy, which on Tuesday

topped Wall Street's second-quarter earnings estimates and lifted its profit outlook for the year. In an effort to turn its fortunes, Circuit City has slashed jobs and revamped its operating systems.

"While we are not satisfied with the financial performance for the quarter, we made solid progress on our multiyear turnaround plan to increase productivity and to improve the customer experience," said Philip Schoonover, chairman, president and chief executive. "We expected the changes to be disruptive in the near-term, but necessary to deliver long-term profitable growth."

The company now expects a full-year loss from continuing operations. Analysts, on average, had expected Circuit City to report a profit of 37 cents a share for the year, according to Thomson Financial.

For the third quarter, Circuit City said it expects "continued weakness," but it sees a loss less than that of the second quarter. The company expects to turn a profit for the fourth quarter, which includes the holiday season.

Analysts had forecast a loss of 2 cents a share for the third quarter and earnings of 85 cents a share for the fourth.

Shares of Circuit City recently were down $2.05 to $8.52, sliding well past the 52-week low of $9.43 set Sept. 10. The shares traded at a 52-week high of $29.31 last October.