RICHMOND, Va. -- Circuit City Stores Inc., the nation's no. 2 consumer electronics chain, reported a 26 percent increase in fourth-quarter net income as it cut costs.
The results, excluding the sale of its bankcard operation to FleetBoston Financial, exceeded Wall Street expectations, but chief executive W. Alan McCollough said the full year's results fell short of his projections.
"We are not satisfied with our sales and earnings performance for fiscal 2004," McCollough said Wednesday. "Although we are pleased that, particularly in the fourth quarter, we made progress in our expense reduction efforts, we recognize that a key component of a sustained earnings turnaround will be strong sales growth."
Circuit City also announced two planned buyouts. It has signed an agreement to acquire InterTAN Inc., an Ontario-based consumer electronics retailer, in a cash-tender offer for $14 per InterTAN common share, or about $284 million.
The deal would give Circuit City a foothold in the Canadian market, where it would compete against Future Shop, a large consumer electronics retailer owned by Best Buy Co. Inc. Circuit City plans to introduce InterTAN's private-label products into its stores by the fall.
InterTAN has about 500 company-operated RadioShack stores, as well as 340 RadioShack dealers, 80 Rogers Wireless stores and 40 Battery Plus stores in Canada. It uses the RadioShack name under license from RadioShack Corp. After the completion of the tender offer - expected by June - InterTAN will become a subsidiary of Circuit City.
Circuit City also plans to acquire privately held MusicNow Inc., an online digital-music service based in Chicago, for an unspecified amount. Executives said the purchase will help the retailer expand its Web site offerings. The deal is expected to close in April.
Shares of Circuit City rose more than 5 percent, or 58 cents, to $11.28 on the New York Stock Exchange.
Circuit City earned $89.6 million, or 44 cents per share, in the quarter ended Feb. 29, compared to $70.9 million, or 34 cents a share, in the year-ago period.
The recent quarter includes after-tax costs of $24.4 million related to lease terminations, asset write-offs and 19 closed stores. Also included were after-tax costs of $3.9 million related to the planned sale of a credit-card finance operation and an after-tax benefit of $3.7 million from a reduction in liabilities.
The 2003 quarter included after-tax costs of $6.2 million related to a change in store compensation beginning in February 2003.
Excluding the completed sale of its bankcard operations to FleetBoston Financial, the company earned $94.7 million, or 46 cents per share, compared with $66.4 million, or 32 cents per share, in the year-ago period.
Analysts polled by Thomson First Call expected 36 cents per share.
Revenue increased 2 percent to $3.25 billion in the quarter from $3.19 billion in the year-earlier period. Quarterly sales at stores open at least a year - considered a better barometer of a retailer's health - rose 1 percent.
But for the year, Circuit City lost $89.3 million, or 43 cents per share, compared to a profit of $82.3 million, or 29 cents a share, in fiscal 2003.
The fiscal 2004 loss is mainly due to discontinued operations such as the sale of Circuit City's bank-card operation.
Sales declined 2 percent to $9.75 billion in fiscal 2004 from $9.95 billion in the prior year, and same-store sales fell 3 percent.
McCollough said he was pleased with sales of digital-imaging products, LCD and plasma display devices, digital televisions, music software, and notebook computers.
"We also were pleased with the fourth quarter's stable year-over-year extended warranty revenues, but we remain cautious in our expectations given potential shifts in the merchandise mix and the continued average retail declines in the industry," he said.
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