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Aggressive price-cutting and promotional financing offers by Circuit City have helped it continue its turnround.
Third-quarter earnings at the second-largest US consumer electronics retailer rose to $10.1m, or 6 cents per share, compared with a $5.9m loss in the same period last year.
Earnings per share were boosted 3.2 cents by a $9.4m one-off gain from the settlement of legal action against MasterCard and Visa. Wall Street analysts had been expecting earnings of 4 cents per share.
Circuit City’s total sales rose 15 per cent to $2.91bn, supported by strong sales of flat-panel TVs, portable digital audio products, notebook computers and digital photography products.
However, its gross profit margin slipped from 25.2 to 24.2 per cent, reflecting price cuts for TVs and video software and its promotional low-interest financing offers.
Comparable store sales rose 13.1 per cent, although the number of customers entering its stores was were largely unchanged. The company attributed the increased sales to customers buying more expensive items such as the new generation of flat-screen TVs, and to more effective merchandising in the stores.
For the whole year, Circuit City said it now expected total sales growth of 8-10 per cent, up from a previous forecast expectation of 5-8 per cent.
The company said also announced that Phil Schoonover, its president, would take over as chief executive from Alan McCullough when he retires at the end of February. Mr Schoonover, 45, joined Circuit City from Best Buy in October 2004.
Best Buy, the largest US consumer electronics retailer, saw its shares fall more than 11 per cent on Tuesday after it announced disappointing profits and a weak outlook for the fourth quarter due to higher operating costs.
Circuit City’s shares rose more than 4 per cent in New York morning trading yesterday to $22.18.
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