USA: Retailer sees shortfall triple year-on-year as revenues fall too

Circuit City losses deepen

Circuit City has warned of further sales drops in the second quarter after it announced that they had dropped more than 11 per cent during the first quarter.

The retailer, which was the US’ largest consumer electronics chain till Best Buy displaced it earlier this decade, warned analysts in a conference call that it was expecting a sales fall worst than that, that analysts had predicted.

It reported a loss of $164.8 million (£83.5 million) in the three months up till May 31st: more than three times the loss it reported the same time in 2007 of $54.6 million (£27.6 million). Revenue was also down seven per cent, from $2.49 billion (£1.26 billion) in the first quarter of 2007 to $2.30 billion (£1.16 billion) this quarter.

Speaking in its conference call, the firm revealed that most of its sales growth had come from television sales as the US gears up to move to digital broadcasts, as well as increased traffic via its online site Circuit City Direct. TV sales were in the high single digit growth according to chief merchandising officer John J. Kelly.

However, while internet sales continued to help drive growth, chief executive Philip Schoonover was forced to admit that growth was only three per cent, down from 21 per cent in the same quarter last year, though he cited the launch of Vista as a key driver for sales in 2007.

The lack of a major product launch also hit its services division Firedog hard, with installation revenues falling 16 per cent.

On a more positive note, Schoonover said that the firm’s new retail spin off The City was doing well. "We had 25 of our new The City store at the end of the quarter. In the 2009 fiscal year, we will continue to refine the model to improve our financial performance and differentiate he concept.

"We know the concept works well with customers and they prefer the shopping experience," he continued. "We are focused on improving our operating model in order to produce superior returns. Most of this work is in the entertainment sector of our newest concept."

And while notebook sales grew – albeit slowly – it was the firm’s attach rate for accessories that helped the firm soften the blow of slowing sales. Although they were down on the same time last year, they managed to maintain the sales rate from Q4.

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