Amid Profit Warning, Circuit City to Cut Jobs, Stop Selling Appliances

Circuit City Group said Tuesday that it will close eight distribution centers and cut 1,000 jobs, or 1.7% of its work force, as it remodels most superstores and quits selling appliances.

The nation’s second-largest consumer-electronics chain also said earnings for its fiscal second quarter will fall far below estimates, pushing its shares down as much as 23%.

Richmond, Va.-based Circuit City said it expects earnings of 32 cents, excluding a charge of $30 million, or 9 cents, to close distribution centers for the quarter ending Aug. 30. That’s below the 43-cent average estimate of analysts polled by First Call/Thomson Financial. It earned 35 cents in the year-ago quarter.

Circuit City’s same-store sales in the second quarter for consumer electronics and home-office products are increasing in the high single digits, while appliance sales have been negative, Chief Executive Alan McCollough said. Same-store sales exclude sales from new or closed stores.

“We want to have a consumer-electronics business without any distractions,” McCollough told analysts and investors in a conference call.

Shares of Circuit City fell $6.38 to close at $26.25 in New York Stock Exchange trading after dropping to $25.25. The stock already had fallen 28% this year.

“Appliances are the short-term reason, but the real reason for the problems is an aging store base they haven’t remodeled and a nimble competitor in Best Buy,” the largest U.S. retailer of consumer electronics, said John Glass, an analyst at Deutsche Banc Alex. Brown, who Tuesday cut his Circuit City rating to “market perform” from “strong buy.”

The cost of store remodelings will be at least $1 billion, Glass said. The company said it will take three years to remodel its superstores.