Circuit City Stores Inc.'s fourth-quarter profit may have pleased some shareholders, as its stock skyrocketed about 4.6% in early trading to hover just above $4.72 per share. The question is: Will the bottom line improvement satisfy activist and 6.5% stakeholder Wattles Capital Management's Mark Wattles, who awaits a promised meeting with the retailer following his recent nomination of a slate of five directors to the board, push to ouster chairman and chief executive Philip Schoonover and request that the retailer hire an investment bank to evaluate potential buyer interest?
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The electronics retailer reported net earnings of about $4.85 billion for the fourth quarter ended Feb. 29 compared with a roughly $4.2 million loss for the year-ago period. Net sales for the quarter slipped 7.7% to $3.65 billion from $3.95 billion in the year-ago period.
What Circuit City failed to address during its Wednesday earnings call was news that it has hired Goldman, Sachs & Co. to evaluate a potential sale or other strategic alternatives, as The Deal reported Monday. To potentially avoid questions related to the hiring of a bank or anything related to Wattles' agitation, prior to the question and answer session on the call the company said it will consider his proposals, but will not entertain any questions related to Wattles.
Regarding the pending sale of its Canadian InterTan Inc. business, which it has previously said it hired Goldman to evaluate, the company said it continues to explore strategic options.
In a related note, BusinessWeek in a Tuesday report addressed a possible sale, saying that "rumors swirled April 7 that Circuit City, the nation's No. 2 retailer, with 677 stores, has hired investment bank Goldman Sachs to pursue opportunities for a sale." What BusinessWeek failed to mention in its reporting is that those "rumors" were broken by The Deal. - Michael Rudnick
