Circuit City’s Profit a Surprise

Circuit City Stores Inc., the No. 2 U.S. consumer electronics chain, surprised Wall Street on Tuesday by posting a profit in its fiscal second quarter on strong television sales.

The Richmond, Va.-based retailer said it earned $1.4 million, or 1 cent a share, in the quarter ended Aug. 31. That contrasted with a loss of $11.9 million, or 6 cents, a year earlier.

Analysts surveyed by Thomson Financial had expected the company to lose 3 cents a share in the quarter.

Circuit City shares gained 92 cents, or 5.9%, to $16.43.

The results marked the first time Circuit City had posted a second-quarter profit in five years and came despite a costly fight involving its new Canadian stores. Circuit City took a hit of 3 cents a share in the second quarter after a licensing spat with RadioShack Corp. forced it to rebrand the stores.

Circuit City’s sales rose almost 8% to $2.56 billion in the quarter. Same-store sales, or revenue at stores open at least a year, rose 5.3%.

W. Alan McCollough, Circuit City’s chief executive, said the retailer recorded strong sales in many categories, including portable digital audio and online business. But it was in the crucial TV category, he said, that the company “continued to drive market share increases in both plasma and LCD televisions.”

The gains helped offset same-store sales declines in camcorders, DVD players and desktop computers.

Donald Trott, an analyst with Jefferies & Co., called Circuit City’s performance “somewhat of a pleasant surprise.” But he added that the retailer benefited from lower store relocation expenses and positive industry trends, including the Apple iPod phenomenon.

Circuit City, which trails only Best Buy Co. among U.S. consumer electronics chains, said it expected sales growth of 5% to 8% in fiscal 2006, revised from a previous forecast of 3% to 6%.