High-tech big-box retailer CircuitCity (NYSE:CC) releases its third-quarter earnings numbers on Monday, and you know what that means: Retail investors have a long weekend of fingernail-nibbling ahead of them.
With the memory of Tuesday morning fresh in their minds, it's understandable that they're nervous. And no, I'm not speaking of that Tuesday Morning; I'm referring to earlier this week, when Circuit City archrival Best Buy (NYSE:BBY) saw its stock fall 12% on a disappointing earnings report.
But note the reason that "Best Buy" became "Worst Sell-off." It wasn't because of any problem with moving product -- as my Foolish colleague Stephen Simpson explained earlier in the week, Best Buy "missed estimates" because it spent too much to build out its store base and ramp up its service offerings. Its sales actually rose 10% year over year. If Circuit City can manage to avoid telling a similar tale on Monday, chances are its numbers will look just fine.
As for what qualifies as "just fine," analysts want to see Circuit City report $2.7 billion in sales for the quarter, and reverse last year's loss to turn a $0.04-per-share profit. The company itself has not publicly set a specific earnings target for Q3, or indeed for the year as a whole. In its forward guidance back in September, Circuit City said only that, based on strong sales trends, it was upping its full-year sales expectations to a 5% to 8% improvement over fiscal 2004, and hoping to achieve 1.3% to 2.3% growth in operating margins for the same period.
We won't know if it's met that goal until the fourth quarter ends. Year to date, Circuit City remains in the red on an operating basis -- but that's not unusual for a retailer prior to its Christmas sales. Historically, the company only breaks into profitability in Q4. The second quarter of fiscal 2005 was the first time in at least three years that Circuit City earned a profit in anything other than a fourth quarter.
If Circuit City does manage to meet analysts' profit expectations, it will mark the first time in a long while that the company has tallied three consecutive profitable quarters. It doesn't take a clairvoyant to foretell what effect that might have on the stock come Monday.
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Fool contributor Rich Smith has no position in any company named above. Best Buy is a Motley Fool Stock Advisor recommendation. The Fool has a disclosure policy .
