Updated from 7:57 a.m. EDT
posted a $124 million second-quarter loss that reflected continued hemorrhaging in its credit card unit as well as weaker-than-expected sales in July and August. The company indicated, however, that it now expects to receive considerably more money than it had first hoped when it sells the credit card unit before the end of the year.
Circuit City, based in Richmond, Va., lost $124.2 million, or 60 cents a share, on total revenue of $2.16 billion in the latest quarter, compared with earnings of $20.5 million on sales of $2.2 billion. Same-store sales fell 5% in the latest quarter from a year ago.
The latest quarter includes a charge of 46 cents a share related to the reduced carrying value of its credit card operation; before that, the company lost 14 cents a share in the latest quarter. Analysts surveyed by Thomson First Call were forecasting a loss of 13 cents a share on revenue of $2.13 billion.
The news send the shares down 39 cents, or 3.5%, to $10.81. (The mushrooming losses at Circuit City compare unfavorably to the
profit machine that is its main rival,
, which also reported earnings Wednesday.)
This year's second quarter included a loss of $133.3 million from Circuit City's finance operation, a bloodletting that reflected the reduced carrying value and lower retained interest from two credit-card securitizations. That loss was the main culprit in lopping about $250 million from the company's cash position between Feb. 28 and Aug. 31, when cash and equivalents totaled $633 million at the company.
Operationally, the second quarter trended from poor to fair. "Our sales pace during the first two months of the quarter reflected significant drops in average retails as well as slight declines in store traffic," the company said. "As we entered the back-to-school season, the sales pace improved, and we produced comparable store sales growth in August despite facing a challenging comparison from August of last year."
The company said its best items included digital big-screens and LCD and plasma thin-screen products; digital imaging; and DVD movie titles, and personal computers.
The news was not all bad, however. After announcing plans last month to unload the credit card unit, Circuit City said Wednesday that a number of bids have been received and that the expected loss on the sale will be more like $105 million than the initially expected $200 million. About $95 million of that loss was expensed in the second quarter. Circuit City expects to pocket about $295 million in cash from the transaction, about $100 million more than initially expected, when it is completed sometime later this year.