Electronics retailer Circuit City
It's surprising just how bad Circuit City is doing, considering that consumers are snapping up flat-screen televisions, video games, and portable music players with maniacal enthusiasm. Flat-panel comps did grow in the double digits, but plummeting comps in projection and tube televisions "more than offset the flat panel television increase," according to the company. Management also cited double-digit decreases in camcorder and DVD hardware sales.
The earnings press release detailed other sales trends, and a quick perusal of what's selling versus what isn't makes complete sense, including strong laptop trends at the expense of falling desktop sales. What doesn't make sense is why Circuit City can't adjust its merchandise mix to benefit from the popularity of Apple
Archrival Best Buy
Second-quarter sales fell 6.2% on a 7.9% drop in comps. Earnings also came in negative, with management projecting "continued weakness in its third quarter results" and an operating loss for the full year. Management's spin on the quarter was that it "made solid progress on our multi-year turnaround plan to increase productivity and to improve the customer experience."
Perhaps Circuit City will turn things around, but it's worrisome that operating results have only deteriorated during one of the stronger cycles for consumer electronics. Best Buy recently predicted a more difficult sales environment, as higher gas prices and residential housing woes could eventually slow consumer spending. That means the going will probably only get tougher from here on out.
In response to depressing results, Circuit City's stock price reached a new 52-week low of $8.46, or more than 70% less than the levels reached last June, when investors were more optimistic about its restructuring plans. That could be good news to prospective investors, since the market has all but given up on a near-term turnaround. But until tangible signs of improvements emerge, I'll be staying far away from Circuit City as an investment option.
For related Foolishness: