Circuit City reverses trend and reports a profit

Circuit City Stores Inc. is pegging its future on a renewed focus on customer service.

In a conference call yesterday on which the company announced that cost-cutting helped it increased its quarterly profit for the first time in more than a year, the retailer outlined what it said was a continuation of its strategic plan.

The fiscal fourth-quarter earnings beat analysts' profit projections.

The chain also attempted to control the conversation about its future by refusing to allow questions about a dissident investor. Mark J. Wattles, as head of Wattles Capital Management LLC investment company, has asked that Circuit City's board of directors fire its president. He also wants shareholders to vote out the board during shareholders annual meeting June 24. Wattles owns 6.5 percent of the company.

"We have turned our full attention to improving the in-store customer experience through crisp execution and to rebuilding a more effective customer-focused sales culture," said Philip J. Schoonover, Circuit City's president and chief executive.

The Henrico County-based electronics retailer earned $4.85 million, or 3 cents per share, in the three months that ended Feb. 29. That compares with a loss of $4.25 million, or 3 cents per share, during the same time period last year.

Analysts polled by Thomson Financial, a research firm in Stamford, Conn., predicted a loss of 7 cents per share for the most recent quarter.

Revenue fell to $3.65 billion, down 7.7 percent. Dropping 10.4 percent for the quarter were same-store sales, which track stores open at least a year and are used as an indicator of a company's performance.

For the year, the chain lost $319.9 million, or $1.94 per share, compared with a loss of $8.3 million, or 5 cents per share loss, during the same time period the previous year.

Revenue fell 5.5 percent to $11.74 billion.

Sales at stores open at least one year fell 7.7 percent for the year.

In comparison, last week rival Best Buy Co. Inc. reported a 3 percent drop in earnings to $737 million for its fourth quarter. For the year, its profit rose 2 percent to $1.41 billion.

Colin McGranahan, a senior analyst for Sanford C. Bernstein and Co. LLC, a New York City investment management firm, wrote in a note to investors: "Today's report does little to change our view of a challenging consumer-electronics sector and still quite difficult times ahead for Circuit City."

But McGranahan believes that working on customer service is a good first step for the chain.

The focus "could begin to stabilize [Circuit City's] in-store operating and staffing model, which would result in stronger sales," he said.

Schoonover said Circuit City would focus its attention on improving its sales process.

This strategy is an extension of changes the chain made last year. Officials said it's the approach failed when first implemented.

John T. Harlow, executive vice president and chief operating officer, said the chain would achieve its goals of increasing sales by improving customer service by building trust, fine-tuning its sales methods and improving merchandise presentation.

Improved customer service will push sales of items with high profit margins such as its "firedog" services, home-installation business, extended warranties and after-market accessories, he said.

That existing plan has been tweaked, Harlow said, to make the transition easier.

He said he has met with store and regional managers to make sure the message of better sales through customer service is reaching frontline employees.

Shares of Circuit City closed at $4.45 yesterday, down 8 cents.