Circuit City Results Hurt by Higher Costs

Circuit City Stores Inc. (CC) on Friday posted a wider-than-expected quarterly loss as costs to rebrand its Canadian stores and improve customer service offset higher sales of plasma TVs, satellite radios and other digital items.

The No. 2 U.S. electronics chain, grappling with more than four years of market share losses to bigger rival Best Buy Co. Inc. (BBY), posted a loss from continuing operations of $13.1 million, or 7 cents a share, in the first quarter ended May 31, compared with a loss of $5.2 million, or 3 cents a share, a year-ago.

According to Reuters Estimates, Circuit City analysts had expected a loss of 3 cents a share.

The results stand in sharp contrast to Best Buy, which on Tuesday reported an 85 percent jump in quarterly profit as revenue rose by 12 percent. Analysts have said the results indicated the top electronics retailer continued to win market share away from Circuit City.

Circuit City, based in Richmond, Va., said sales from stores open at least a year, a key measure of retail performance, were flat compared with a year-ago. Analysts had expected a slide of as much as 3 percent.

Total sales rose 6.4 percent to $2.23 billion from $2.09 billion a year earlier.

Circuit City Chairman and Chief Executive Officer Alan McCollough said rising expenses outweighed year-over-year improvements in sales and gross profit margins.

The higher costs included $11.9 million in pre-tax expenses for a write-down of inventory related to a rebranding of the company's Canadian stores that have operated under the RadioShack (RSH) brand name.

The quarter also included $4.9 million in pre-tax expenses for the U.S. business associated with consulting services to improve store productivity, merchandising and marketing.

"We believe these investments are necessary and help position us for long-term success," McCollough in a statement.