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To: reaper who wrote (152839)	2/22/2002 9:44:49 AM
From: reaper	Respond to of 436258

Circuit City to miss, and to spin off CarMax. hey Patron, you still short this pig?? covering CC today; doubling down on KMX short established yesterday. btw, check out this gem from the Merrill Lynch "analyst" two days ago... Electronics retailer Circuit City (CC:NYSE - news - commentary - research - analysis) jumped 8% after a Merrill Lynch analyst upgraded the stock to strong buy Wednesday morning, saying it was cheap after two days of sharp selloffs. Circuit City shares lost more than a quarter of their value Friday and Tuesday as investors worried about rising remodeling costs. But analyst Peter Caruso's note Wednesday morning predicted Circuit City would account for the remodeling costs as a one-time charge, thereby preserving operating earnings. The report comes amid heightened scrutiny on Wall Street of the quality of companies' profits, particularly regarding the varying definitions of so-called operating earnings. "Investors price and value retail stocks based on what is happening to operating earnings and we think will exclude the cost of a major remodeling campaign if and when it comes," Caruso wrote. (Merrill Lynch has had an investment banking relationship with Circuit City in the past.) Cheers biz.yahoo.com Friday February 22, 9:31 am Eastern Time Circuit City to Spin Off CarMax NEW YORK (Reuters) - Circuit City Stores Inc. (NYSE:CC - news) on Friday said it will split off its CarMax auto store business into a separate publicly traded company, and warned that store remodeling and relocations will cut earnings this year and in 2003. The Richmond, Virginia-based company, the No. 2 U.S. consumer electronics retailer behind Best Buy Co. Inc. (NYSE:BBY - news), also said sales in January and February were below expectations. The company's shares fell more than 8 percent to $21.61 in pre-market trading on Instinet from their Thursday's close of $23.59. Todd Kuhrt, an analyst at Midwest research, said while the news of the CarMax spin-off may be seen by investors as positive, the company's earnings guidance was disconcerting. ``It's a little disappointing,'' he said. He added that the company's earnings outlook could even be much worse if the store remodeling costs were included, not as one-time items, but as ongoing charges that are prevalent in the store-remodeling prone retailing industry. The company's store remodeling and store relocations, which are expected to cost $182 million in the next two years, will shave 6 cents off earnings per share in 2002, and reduce them by 18 cents off in 2003, Circuit City said in a statement. The retailer said it expects to earn between 70 cents to 74 cents in the fourth quarter, ending Feb. 28, slightly below analysts' consensus estimate of 75 cents, as compiled by research firm Thomson Financial/First Call. Circuit City earned 49 cents in the year-earlier period, and current analysts' estimates range from 72 cents to 78 cents. The company said it had anticipated January and February sales to ``moderate'' from the December levels, especially given merchandise shortages as a result of vendors changing to new product lines. Fourth-quarter sales at stores open at least a year, or same-store sales, are expected to show mid-single-digit growth, Circuit City said, adding for the two months combined same-store sales growth is likely to be in the low single digits. Circuit City has been losing market share and customers to Best Buy as it struggles to revamp its operations and boost sales after deciding in November 2000 to cease selling major household appliances like refrigerators and dishwashers. But increased spending by Americans on red-hot home entertainment technologies like big screen televisions and DVD players helped Circuit City regain some lost ground through the second half of 2001. Some analysts and investors have worried that the company's store remodeling program could prove costly and hobble the turnaround in the near term. Those concerns were reflected in back-to-back losses in the company's share price, which shed more than 24 percent since last Friday when the store remodeling jitters surfaced. In the spin-off, holders of CarMax Group stock would receive one share of CarMax Inc. stock for each share of stock redeemed by the company. It said management currently expects holders of Circuit City Group stock to receive 0.316 of a share of CarMax Inc. stock for each share of Circuit City stock they hold. The company said it will increase its liability for lease termination costs by about $10 million, related to its exit from the appliance business in the last fiscal year. It expects fiscal 2002 earnings of 89 cents to 93 cents a share, including the lease termination costs and an anticipated contribution from CarMax of up to 31 cents, it said.