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December 19, 2006

Circuit City posts Q3 loss

US electronics retailer Circuit City described its third quarter as "volatile" as it reported a quarterly loss and lowered its outlook for the full year. The company made a loss of $16.0 million in the three months ended November 30, 2006 compared with a $10.1 million profit in the previous year.

By CBR Staff Writer

Lower prices on televisions, PC hardware, and entertainment software ate into the company’s profit margins, as did a lower proportion of extended warranty sales.

While a number of categories underperformed our gross margin expectations, the most significant variance from plan was in the flat panel television category, said Philip Schoonover, chairman, president and chief executive of Circuit City Stores.

The pace of the decline in flat panel television prices accelerated during the quarter as manufacturers and retailers competed aggressively for market share, and prices fell to unanticipated levels. Although flat panel television unit sales increased by strong double digits, the increase in television units and associated attachment sales did not produce the gross profit dollar results necessary to offset these price declines.

In total, Q3 net sales increased 6.9% to $3.10 billion from $2.90 billion in the same period last year. Comparable store sales were up 5.1%.

The company now expects consolidated net sales growth of between 8% and 9% for fiscal 2007. It forecasts that earnings from continuing operations before income taxes will be 1.0% to 1.4% of consolidated net sales, excluding the impact of classifying Rogers Plus stores as discontinued operations.

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