Circuit City Shorts Out Earnings

Higher costs related to the electronic retailer’s efforts with re-branding Canadian stores and improving customer service drag down earnings.

Circuit City continues to take a beating from Best Buy, which saw its profits rise 85 percent for the quarter. Circuit City had expected a loss of 3 cents per share.

Instead, the company lost $13.1 million USD in its first quarter, or 7 cents a share. Sales rose about 6 percent to $2.23 billion in the quarter from $2.09 billion in the year-ago period. Domestic same-store sales were unchanged.

But ongoing legal troubles with Circuit City in Canada regarding the names of stores Circuit City acquired caused a $11.9 million pre-tax expense. When it bought Ontario-based InterTan, that organization operated stores with the RadioShack name. RadioShack promptly sued in Texas court in May 2004 to rescind its licensing agreement with InterTan after the acquisition.

Circuit City will now rename some 800 stores in Canada to The Source by Circuit City. And it continues to battle with RadioShack in court over the alleged harm it has done to Circuit City’s business.

Despite the losses, Circuit City pointed to stronger sales of high-end televisions and digital music players as an encouraging sign. Also its investments in improving customer service and merchandising should help the company’s long-term prospects, according to CEO Alan McCollough.

David Utter is a staff writer for Murdok covering technology and business. Email him here.