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Circuit City warns Wall St.
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July 25, 2000: 9:09 a.m. ET
Retailer says 2Q, 3Q earnings will be less than forecast due to restructuring
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NEW YORK (CNNfn) - Circuit City Stores Inc. warned Tuesday that its profit will miss Wall Street forecasts for the second and third quarters as it moves to get out of the home appliance business, remodel its stores and focus more on consumer electronics and computers.
The national retailer said it now expects its second-quarter profit to ring in at about 32 cents a share, below the 35 cents a share it earned a year ago and the 43 cents expected by analysts polled by earnings tracker First Call Corp. For the third quarter, the Richmond, Va.-based company expects to earn 16 cents a share, less than half the 33 cents forecast by analysts.
Circuit City (CC: Research, Estimates) said it will remodel all of its stores, close six distribution centers by the end of this year and another two over the following 12 months, and eliminate roughly 1,000 jobs. All of that should lead to a fourth-quarter profit of 98 cents, more than the 96-cent First Call average estimate, as the company begins to see the benefit of its overhaul.
Still, it expects its 2000 earnings to total $1.60, including the charges, less than the First Call average estimate of $1.99.
 "Continued strength of the consumer electronics and home office categories and the recent substantial weakness in major appliances accelerated our decision to reformat all existing superstores," said W. Alan McCollough, Circuit City's president. "The major appliance business carries high fixed costs and tends to be more cyclical than other retail categories," he said.
Circuit City, known for its white-on-red insignia and white on red store themes, has seen its stock price almost halved in the past 12 months, mostly because of lagging sales of its major appliance items. In June, the company warned that its gross-profit margins would be narrower than expected, hurt by a decline in demand for major appliances.
The company said it expects to spend about $2.5 million to remodel each of its stores, though it said it should recoup roughly 30 percent of that per-store cost through increased traffic and higher sales. Circuit City has 573 Circuit City superstores and 43 mall-based Circuit City Express stores
Shares of Circuit City (CC: Research, Estimates) fell in pre-hours trading to 30 from 32-5/8 Monday. 
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Circuit City
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