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Circuit City Reports Q3 Results
Dec 19, 2006
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Circuit City Stores, Inc. reported results for the third quarter ended November 30, 2006. For the third quarter ended Nov. 30, 2006, net sales increased 6.9 percent to U.S. $3.10 billion from $2.90 billion in the same period last year, with consolidated comparable store sales increasing 5.1 percent from the prior year.

For the third quarter, net sales for the domestic segment increased 7.3 percent to $2.93 billion from $2.73 billion in the same period last year, with comparable store sales increasing 5.5 percent from the prior year. For the quarter in the domestic segment, Web-originated sales grew 67 percent, services revenues grew 72 percent and call center sales grew 84 percent from the prior year.

For the third quarter, net sales for the international segment increased 0.6 percent to $171.6 million from $170.6 million in the same period last year. The increase was driven by the effect of fluctuations in foreign currency exchange rates, which accounted for approximately 4 percentage points of the international segment's third quarter net sales increase. Comparable store sales decreased 3.7 percent for the quarter in local currency.

The consolidated gross profit margin was 22.2 percent in the third quarter compared with 24.1 percent in the same period last fiscal year. Domestic segment gross profit margin declined 190 basis points from the prior year, driven by a decline in merchandise margin primarily in TVs, PC hardware and entertainment software, as well as a decrease in extended warranty net sales as a percentage of domestic segment net sales.

The international segment's third quarter gross profit margin decline of 165 basis points did not materially impact the consolidated gross profit margin. The decrease resulted primarily from a greater percentage of sales of lower-margin digital products as well as clearance activities related to assortment rationalization.

"The third quarter was volatile for the company," said Philip J. Schoonover, chairman, president and CEO of Circuit City Stores, Inc. "While we are disappointed with our profit performance this quarter, we continue to see evidence that we are on the right long-term path to sustainable growth. We saw sales growth in the key pillars of home entertainment, multi-channel and services. These efforts allowed us to report solid comparable store sales growth despite facing a 13.1 percent comparison from last year. We also made progress in building our pipeline of new Superstore sites.”

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