Circuit City’s Sales Sluggish

Circuit City Stores Inc., the No. 2 U.S. electronics retail chain, on Monday reported lower quarterly sales at stores open at least a year, signaling a widening gap with top rival Best Buy Co. and sending its shares down as much as 12%.

Circuit City, which has posted inconsistent sales and earnings for the last four years, said store traffic was weak in the third quarter ended Nov. 30 because it cut back on promoting discounted CDs and DVDs.

It also said changes in the way it sells mobile phones and digital satellite services alienated customers, hurting business.

Analysts said the 4.3% drop in same-store sales in the quarter reflected continued loss of market share to Best Buy. Wall Street had expected same-store sales to be little changed to up as much as 4%.

“People are pretty disappointed with these numbers,” said Scot Ciccarelli, an analyst at RBC Capital Markets who had expected a 2% gain in same-store sales, a key industry indicator.

“This brings up some legitimate concerns” about the company’s ability to drive profitability, he said.

Before Monday’s slide, Circuit City’s stock had risen 60% since the start of the year on hopes of a sales and earnings rebound.

Circuit City also is grappling with escalating competition from mass discounters such as Wal-Mart Stores Inc.

Richmond, Va.-based Circuit City said total sales in the third quarter rose 3.8% to $2.50 billion, compared with Reuters Estimates average forecast of $2.58 billion. The company has more than 620 stores in the United States.

Best Buy last week reported a 10% jump in third-quarter sales, to $6.65 billion. Sales at stores open at least 14 months rose 3.2%.

Circuit City shares fell $1.08, or 7%, to $15.13 on the New York Stock Exchange. .