Circuit City Posts Surprise Profit
{{#rendered}} {{/rendered}}Circuit City Stores Inc. (CC) , the No. 2 U.S. electronics chain, Tuesday posted a surprise second-quarter profit, helped by strong sales of plasma TVs and other digital products.
Shares of Circuit City, which is trying to stem more than four years of market-share losses to top-ranked rival Best Buy Co. Inc. (BBY) jumped 10 percent, to $17.20 on the New York Stock Exchange (search).
The Richmond, Va.-based retailer said it earned $1.3 million, or a penny a share, in the quarter ended Aug. 31, compared with a loss of $11.9 million, or 6 cents a share, a year-ago.
{{#rendered}} {{/rendered}}According to Reuters Estimates, Circuit City, which had not previously provided an outlook, was forecast by analysts to post a loss of 3 cents a share.
"During the second quarter, we moved forward on a number of fronts. We're pleased with returning to second-quarter profitability for the first time in five years," Alan McCollough, Circuit City chairman and chief executive, said ina statement.
Analysts said the latest quarterly results marked another significant stridein the company's turnaround efforts, spearheaded by President Phil Schoonover, aformer Best Buy executive.
{{#rendered}} {{/rendered}}"It was a solid quarter. They are making material progress on their turnaround," said Scot Ciccarelli, an analyst at RBC Capital Markets.
However, he added that "I don't think they (Circuit City) are gaining marketshare. I think (this improvement is tied mainly to the) growth of the industry."
"It's a matter of chocolate or vanilla and I would prefer the Best Buy flavor at this point," said Ciccarelli, who has a "neutral" rating on Circuit City shares.
{{#rendered}} {{/rendered}}He also noted that Circuit City had been "very promotional in the quarter" and said its stock may merely be recouping losses its suffered last week as BestBuy reported a quarterly profit shortfall that unnerved investors.
Earlier this year Circuit City began revamping its supply chain and launcheda bid to improve its checkout systems and make its promotions more effective.
Circuit City said sales from stores open at least a year, or same-store sales, jumped 5.3 percent, outpacing even the most pessimistic of views on Wall Street.
{{#rendered}} {{/rendered}}Even so, "gross margins declined, implying comps were driven by more aggressive pricing," Gary Balter, an analyst at Credit Suisse First Boston, saidin a research note.
Analysts had expected same-store sales growth to range from flat to as much a 2 percent, compared with a year earlier increase of 2.9 percent. Total quarterly sales rose 7.8 percent to $2.56 billion.