Monday, December 24, 2007

Circuit City: I Am At a Loss

How could you announce million dollar "retention" bonuses for executives and then days later announce results like this? Watching these guys operate is like watching a monkey try to impregnate a football.

For the three months ended Nov. 30, Circuit City's (CC) losses ballooned to $207.3 million, or $1.26 per share, from $20.4 million, or 12 cents per share, a year ago. Excluding tax-related accounting items, losses totaled 64 cents per share in the latest period.

Sales slipped 3 percent to $2.96 billion from $3.06 billion a year earlier, with sales at stores open at least a year falling 5.6 percent.

CEO Phillip Schoonover still insists Circuit City is on the right track. "We're implementing the right initiatives to lead to profitability and sustained growth," he said. "We're staying the course on our longer-term strategic initiatives." By long term do you mean by the end of the decade Phil? I mean it has taken you three years to ruin the company, do you really think you can bring it back faster?

Regarding the bonus announcements, Schoonover said the bonuses are essential to keep together a team he spent three years assembling. Three years assembling a team to get these results? Far from getting bonuses for staying with CC, these incompetent buffoons ought to be thanking god everyday they are even employed.

Bruce H. Besanko, Executive Vice President and Chief Financial Officer made the following inexplicable statement regarding the bonuses:

"The base program that we have in place was a combination of stock options and restricted shares. Because of the current stock performance, that program for many of our executives was underwater and so far underwater that it didn’t have any meaningful value over time. In addition to that, our senior most executives did not receive a bonus for the last two years and will not receive a bonus based on this year’s performance. So we have two plans now to retain those leaders. One is our cash-based retention program and two is a stock-based incentive program which is in line with our annual stock-based incentive program and I feel I have the tools in place now to keep the management and leadership as well as the managers at all levels in the company engaged in this work."

Essentially, he is saying that because the executives performance has been so bad, under the old plan, they were not eligible for a bonus. That being said, CC decided just to lower the bar, just show up for the next three years, performance be damned to get your money. This is disgusting.

This makes me want to buy shares just to bash them every single can shareholders stand for this?

If that isn't enough to have shareholders going into vapor-lock, Schoonover then said, "We are very dissatisfied with our third quarter results. We underestimated the financial impact from the disruption of our transformation work." Here it comes "We believe that these issues are primarily self-induced".

He "believes" they are? What else could it be? What were they doing, remodeling stores in the middle of the Christmas shopping season? Shares are down 25% today and now down 70% for the year.

Back in June
when people speculated Eddie Lampert and Sears might make a run at CC, I opined, "Eddie Lampert, based on past history would just be as likely to wait for these buffoons to run it into bankruptcy and buy it there even cheaper than now."

It just may get there next year.....

Let's not forget that current management turned down a $20 offer per share from private equity not too long ago.... shareholders will never see that price again, not with these guys in charge.

Finally, A note to Herb Greenberg: How can you in all intellectual honesty say Eddie Lampert at Sears Holdings (SHLD) is worse than this guy? Herb, Sears IS MAKING MONEY!!!!

This is a call for Herb to do a "do over" with his pick for 2007. We'll give him a Mulligan or should we now call it a Greenberg?

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