Circuit City reports a loss of $54.6 million

RICHMOND, Va. — Electronics retailer Circuit City Stores Inc. said Wednesday it lost $54.6 million in the first fiscal quarter — when it cut jobs to reduce costs and restructured to fend off competition — and withdrew its earnings guidance for 2008.

The results came a day after larger rival Best Buy Co. reported sharply lower first-quarter profit and downgraded its 2008 earnings outlook. Both retailers say the softening economy is steering shoppers away from high-margin items such as flat-screen televisions.

"There's a lot of overall concern" about the economy, said retail consultant Wendy Liebmann, president of WSL Strategic Retail, which analyzes consumer shopping patterns for retail industry clients. "When I see companies (such) as Best Buy and Circuit City talk about the impact of things like this — economic and confidence issues — on their shoppers, I'm more willing to accept this as a reason, more than a year ago."

Rising gas prices are having a direct impact on everyday spending, and middle-income shoppers are almost as likely to curb their spending as those with incomes under $50,000, Liebmann said.

For the quarter ended May 31, the nation's No. 2 consumer-electronics chain behind Best Buy lost 33 cents per share, compared with a profit of $6.4 million, or 4 cents a share, a year ago. Analysts surveyed by Thomson Financial expected a per-share loss of 32 cents.

Sales fell 4 percent to $2.49 billion, from $2.6 billion in the previous year's quarter. Sales at stores open at least a year, known as same-store sales, slipped 5.6 percent. In the year-ago period, sales grew 17 percent; same-store sales rose nearly 15 percent.

Circuit City withdrew its financial guidance for fiscal 2008 because the company expects continued volatility as it restructures in an unfavorable economic environment.

The company in March laid off about 3,400 retail employees and replaced them with lower-paid workers and outsourced its information technology work to IBM Corp. Last month, the company cut retail management positions and eliminated about 200 corporate-office jobs.

Though Circuit City withdrew 2008 guidance, chief executive Philip J. Schoonover said in a conference call with analysts that the company expects its cost-cutting measures to save $200 million over the year. Though some of the savings will be offset by other expenses, the company hopes to be able to invest in new stores, IT systems, online-selling capability and its Firedog home-installation business, Schoonover said.

Schoonover also said that the major restructuring changes that have been completed will allow the retailer to be prepared for the upcoming back-to-school and holiday sales periods.