Circuit City Group
said sales were below expectations in January and February and as a result its fourth-quarter earnings will trail estimates.
Circuit City Group said it expects to post same-store sales growth in the mid-single digits and earnings in its Circuit City operation of 68 cents to 71 cents a share. The company's
operation is expected to contribute an additional 5 cents to 6 cents, bringing the company's expected overall fourth-quarter earnings to 71 cents to 74 cents a share. Analysts were calling for earnings of 75 cents a share, according to First Call.
Circuit City said it had expected a moderation in same-store sales growth in January and February compared with December because of inventory shortages and seasonal shifts in category volume. "Inventories have improved, but selections remain limited in some products where vendors are transitioning to their new lines," the company said.
Circuit City also said it would record $10 million in additional reserves to cover lease-termination liabilities, reducing earnings by an additional 3 cents a share. The costs are related to distribution centers and service centers closed as part of the company's exit from the appliance business. "The economy was much more robust when we first established liabilities related to these properties, which are available for sublease, and we believe that increasing the liabilities at this time is necessary to reflect the current rental market for these properties."
Circuit City also said it will split off CarMax into a separate publicly traded company.