Circuit City downgraded, Cowen says "too much time, too many obstacles"
The string of bad news continues for Circuit City Stores, Inc. (NYSE: CC). After reporting after Monday’s close that December sales declined, the consumer electronics retailer was downgraded today by Cowen and Co. to “neutral” from “outperform” on account of no time table for a turnaround.
“We believe the turnaround will be challenging in the near-term due to maturing product cycles, a lack of compelling new product cycles on the horizon and a difficult consumer backdrop,” Cowen and Co. analyst Jonathan Cramer wrote in a research note today.
The analyst says value is present; but that there’s no time horizon for when an external catalyst, will “unlock that value.”
Cramer put together a top 10 list of catalysts, which if they occurred, would stimulate positive stock performance. The list includes the necessity for differentiation from competitors, maintaining or reducing store count, reversing a negative comp trend, stabilizing gross margins, implementation of cost controls, consistent store experience, divestiture of Canadian operations and an external cash infusion.
On account of the indefinite delay in the company’s turnaround, Cramer is lowering his estimates to a net loss of $1.38 per share for fiscal 2008 and a net loss of $1.27 per share for fiscal 2009. The mean estimate of 21 analysts surveyed by Thomson Financial is for a net loss of $1.21 for 2008 and a net loss of $0.55 for 2009.
Circuit City reported Monday after the close that total net sales decreased 8.9% to $1.92 billion from $2.1 billion in December 2006 and that consolidated comparable store sales declined 11.4%, driven by a 12.2% decrease in domestic segment comparable store sales.
Shares of Circuit City (CC) edged up $0.18, or 4.28%, to $4.39 at 12:46 p.m. ET. Shares of Circuit City have been trading in the range of $3.61 to $22.02 for the past 52 weeks.
