Electronics retailer Circuit City Group had an unexpected profit in its fiscal first quarter and said it plans to reduce its 75% stake in CarMax Group to help pay for the remodeling of its electronics stores.
But the company's report didn't impress investors. The stock (ticker symbol: CC) slid 14 cents to $15.67 on the New York Stock Exchange after trading as high as $16.40.
In a preliminary report, the firm said earnings in the quarter ended May 31 fell to 4 cents a share from 28 cents a year earlier. But analysts' average estimate was for a loss of 3 cents, according to First Call/Thomson Financial. Circuit City will report final results June 15.
Circuit City has said five times since July that profit would miss analysts' forecasts.
The company's latest results were helped by better-than-forecast CarMax sales and narrower-than-expected losses at its electronics stores.
Still, the firm's sales are expected to have dropped 13% in the quarter from a year earlier.
"I'm still very skeptical," said analyst Alan Rifkin of Lehman Bros., who rates Circuit City "market perform."
"With the spinoff of CarMax and the below-plan sales at Circuit City stores, a shareholder of Circuit City today, post the offering, is going to be left with a lower contribution from the outperforming CarMax Group and a greater contribution from Circuit City," he said.
The retailer said it will offer 7.5 million CarMax tracking shares for sale, which may generate about $113 million based on Wednesday's closing price. CarMax (KMX) fell $1.37 to $15.08 on the NYSE.
Separately, Circuit City was cited Wednesday by Michigan Atty. Gen. Jennifer Granholm for violating the state's consumer protection laws. The firm is accused of failing to provide rain checks for customers when certain specially advertised items weren't available for purchase.