Circuit City Goes Haywire

While Circuit City (NYSE: CC  ) and Blockbuster (NYSE: BBI  ) try to rekindle the magic of their respective retailing heydays, archrival Best Buy (NYSE: BBY  ) continues to make it look easy by consolidating market share into its own hands. Given the dire first-quarter trends that came out of Circuit City yesterday, combining with Blockbuster may be its best shot at survival.

On Monday, Best Buy announced a respectable quarter that saw sales, earnings, and same-store sales all increase. As fellow Fool Anders Bylund pointed out, Best Buy has mastered the ways of successful customer service and stocking plenty of hot-selling consumer electronics, including Apple (Nasdaq: AAPL  ) and Dell (Nasdaq: DELL  ) store-in-store displays to supplement its impressive array of flat-panel televisions, video games, and laptops.

In stark contrast, the best Circuit City could muster was that third-party mystery shopper scores had improved, and it is focused on "creating a good first and last impression with the customer." Still, total first-quarter sales fell 7.4% as earnings fell deeper into negative territory and cash on hand fell 75% to $92.2 million. As a result, management is moving into capital-preservation mode and cutting its dividend going forward.

So why would Blockbuster possibly want to acquire an embattled Circuit City? Well, in the words of Blockbuster management, it sees plenty of potential in "the growing convergence of media content and electronic devices," and there is definite appeal in electronics retailing, as Best Buy and well-managed regional rivals such as CONN'S (Nasdaq: CONN  ) and hhgregg (NYSE: HGG  ) can attest to. Unfortunately for shareholders, Circuit City lost its way some time ago, but there are still entities that see its potential and are looking to save it from the has-been bin.  

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Dell and Best Buy are Motley Fool Inside Value recommendations. Dell, Best Buy, and Apple are Stock Advisor picks. The Fool owns shares of Best Buy. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Ryan Fuhrmann is long shares of Blockbuster and Dell but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. Or scroll down this page a bit and put your comments there. The Fool has an ironclad disclosure policy.


Read/Post Comments (4) | Recommend This Article (3)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 20, 2008, at 3:24 PM, pete369 wrote:

    CIRCUIT CITY CHEATS PEOPLE.

    FIREDOG (1165 Perimeter Center West, Atlanta, GA 30338)

    CHEATS CUSTOMERS. THEY TOOK MY LAPTOP promising DUAL BOOT OF VISTA & XP and CHARGED 115$ then AND THERE.

    NEVER DID PROPERLY AND THE MANAGER WAS RUDE

    I PRAY JESUS THAT THEY GO BANKRUPT

  • Report this Comment On June 20, 2008, at 3:24 PM, pete369 wrote:

    CIRCUIT CITY CHEATS PEOPLE.

    FIREDOG (1165 Perimeter Center West, Atlanta, GA 30338)

    CHEATS CUSTOMERS. THEY TOOK MY LAPTOP promising DUAL BOOT OF VISTA & XP and CHARGED 115$ then AND THERE.

    NEVER DID PROPERLY AND THE MANAGER WAS RUDE

    I PRAY JESUS THAT THEY GO BANKRUPT8

  • Report this Comment On June 20, 2008, at 10:17 PM, forget250 wrote:

    I Read the fine print you idots Any retail store has policies to abide by. I have worked in retail for 40 years and if you have never done this job then you have no clue about policies. If you are so stupild that you can not ask questions about any product at time of purchase then you are simply dumb. Everyday, I hear this crap about Best Buy, and Circuit City. A customer comes in the store and complains about Best Buy, vice versa, I invite all of you to work reail and only then would you know. IDIOTS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  • Report this Comment On June 22, 2008, at 9:34 PM, suspectdevice wrote:

    Agree with forget250. More than likely old pete here wasn't the most polite with the manager, which resulted in equal impoliteness back. Also, I bet you did not read any of the policy's fine print or terms, and took the word of your 16-21 year old salesperson. Do your research before you buy, if not you deserve to be screwed.

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