Best Buy to acquire music-sharer Napster

CHICAGO—Napster Inc., the online music community that rose from a dorm room project to became the scourge of the global recording industry, is being purchased by Best Buy Inc. for nearly $127 million as the electronics retailer tries to boost its digital music business.

The $2.65 per share all-cash deal announced Monday is nearly double the music network's Friday closing price but a small sum to pay for Best Buy, which gets access to Napster's 700,000 subscribers who pay a monthly fee to access digital music catalogs.

"It's not a huge investment, but it definitely has brand recognition," said Morningstar analyst Brady Lemos, who said Best Buy also benefits from the acquisition of technical expertise about the digital music industry.

In a statement, Best Buy valued the deal at $121 million, and said the difference was due to unvested employee stock awards at Napster. According to its most recently quarterly filing, Napster had about 47.9 million shares outstanding as of Aug. 8, implying a price of $126.9 million.

Napster, a once-free file-sharing network incorporated in 2000, was a favorite tool among cheap college students earlier in the decade. . . . more

Best Buy could lose share to discounters

CHICAGO - An analyst said electronics retailer Best Buy Co. Inc. will likely lose market share if heavyweights Target Corp. and Wal-Mart Stores Inc. began to offer installation services to customers.

Citi Investment Research analyst Kate McShane, initiating coverage of the nation's largest consumer electronics retailer, said in a research note late Monday that she was giving the company a "Hold/High Risk rating" and a $47 price target.

"Despite Best Buy (nyse: BBY - news - people )'s growth opportunities we think the sluggish macro environment and increased competition at retail will continue to weigh on results in both the short and long term," McShane wrote to investors.

McShane said Best Buy could face a disappointing fourth quarter - a vital time for retailers - as consumers push more of their spending into earlier periods of the year.

Meanwhile, the Richfield, Minn.-based company could also face pressure from other retailers such as Target Corp. (nyse: TGT - news - people ) and Wal-Mart Stores Inc. (nyse: WMT - news - people ), which has made strong inroads into the consumer electronics sector in recent years.

"We are increasingly concerned by the competitive environment with discounters' foray into providing services for the consumer," McShane wrote. "Customer service and installation is one of Best Buy's competitive advantages in a highly competitive and commoditized industry. While Wal-Mart and Target have no where near the service level of Best Buy (which includes home installation from Magnolia and Geek Squad) the fact that these companies are starting to offer installation in a difficult environment could result in a slow down in share gains or possibly even share loss for Best Buy."

McShane said Best Buy's outlook stands to improve if economic conditions reverse and a major competitor collapses, but its fortunes could head south if there's a lack of new product introduction and discounters begin to amass a larger market share.

Best Buy shares rose $1.62, or 3.8 percent, to $44.40 in trading Monday. The stock is down 19 percent in the year to date.

Source: Forbes

Best Buy to Aggressively Expand in United Kingdom

Richfield, Minn.-based Best Buy Co. Inc. plans to aggressively roll out stores in the United Kingdom, with about 200 stores planned over the long-term, according to The Financial Times. The 200-store U.K. goal will launch with about five stores, which are expected to debut next year--the company's future rollout pace will vary depending on their success. Additionally, Best Buy and European Carphone Warehouse announced a joint venture in May, where Carphone will place its existing retail operation into the partnership. Best Buy will expand into other European countries following its U.K. launch.

Source: DDIMagazine.com

Best Buy to open in-store music centers

Hoping to cater to everyone from the garage guitarist to a recording musician, Best Buy Co. Inc. is announcing a massive new initiative that sets aside store space for an array of musical instruments and gear in dozens of sites nationwide.

The nation's largest consumer electronics retailer will announce Tuesday that it plans to open as many as 85 of the music centers inside its stores by the end of the year and could add even more locations in the future, executives told The Associated Press.

Each site will use about 2,500 square feet of retail space and include roughly 1,000 different products with well-known brand names such as Fender, Gibson, Drum Workshop and Roland.

"We're not just extending the shelf space in the store, we're creating a designated area specifically for this experience," said Kevin Balon, the company's vice president of musical instruments. "And we're trying to create an authentic and genuine musical instrument store look and feel inside of Best Buy."

The Richfield, Minn.-based retailer - already an industry leader in sales of everything from digital cameras to video games - will use its headfirst jump into the $8 billion U.S. musical instrument market to carve out new revenue opportunities as sales of CDs and DVDs slow, experts said.

When the rollout is complete, Best Buy - already considered by many investors to be a global powerhouse in the electronics retailing world - will become the second-largest instrument seller in the country based on locations.

But some observers are cautious about whether the expansion efforts will reap big rewards, particularly as the nation's economy slows and consumers become even more particular about spending hard-earned paychecks.

"It's not a high-growth area and it's obviously going to take up a lot of real estate," said Morningstar retail analyst Brady Lemos.

Executives declined to comment on how much the company is investing in the project or how much they expect to gain from the store-within-a-store effort.

So far, ten sites are already open, including five in California, two in Illinois and two in Minnesota.
Best Buy's selection will include everything from accessories - picks, sheet music and cases - to high-end basses, guitars, keyboards and DJ equipment. Instruments will be housed in separate rooms and the company also plans to offer group music lessons.

Acoustic guitars will sell between $89.99 and $3,200 and drum kits will retail for as much as $5,000.

A selection of the offerings will also be available online in early August.

"However you want to play, if play means you're just learning and you want to play with a bunch of buddies, or you want to play on stage, we can support any of that," Balon said.

Source: Seattle Times

Best Buy aiming for a bigger share of the wireless market

Best Buy Inc. admits at least one weakness: wireless.

The largest U.S. consumer electronics retailer had been dissatisfied with a 2 percent market share in cellphones, while holding an enviable 20 percent in TVs, digital cameras and DVD players, and selling more laptops than any other chain.

But now the big-box behemoth believes it has the ticket to a larger wireless share, even as Fort Worth-based RadioShack Corp. struggles in the category that represents one-third of its business.

By fall, all 957 Best Buy stores in the U.S. will house expanded wireless departments, branded as Best Buy Mobile, in a joint venture with the U.K.'s Carphone Warehouse, Europe's cellphone leader.

It's also planning to add 35 1,000-square-foot free-standing Best Buy Mobile stores to the 15 locations it's been testing in Manhattan and North Carolina for almost two years. Chicago and Minneapolis are next, and Texas, where all Best Buy stores now contain the new mobile departments, is a year away from getting a free-standing store.

With 60 percent of stores converted, Best Buy says its wireless market share has shot up to 3.6 percent from 2 percent at the end of 2007, even though U.S. handset sales dropped 20 percent in the first four months of this year, according to NPD Group.

Best Buy's 28 million Reward Zone loyalty program customers, who historically bought their phones elsewhere, are some of the new customers, said Shawn Score, president of Best Buy Mobile.

The division operates from the company's Minnesota headquarters and is populated by British cohorts who provide expertise on how to run small stores, supply them with mobile products and bundle services.

The relationship went beyond the joint venture last month when Best Buy closed on its $2.1 billion, 50 percent stake in Carphone Warehouse.

New arrangement

Best Buy Mobile overhauls the way the chain had been selling phones: a couple dozen cellphones displayed alongside other small electronics such as MP3 players and cameras. Service activation took well over 45 minutes.

Now stores stock 80 to 100 phones organized by nine contract and prepaid carriers, and plans and no-contract options can be easily compared. Accessories, including Bluetooth headsets, memory cards for music and photo storage, and broadband cards for laptops, are displayed. So are services that can be added on, such as GPS.

Best Buy sells its Geek Squad assistance as part of the package for smart-phone buyers who need help configuring e-mail and other mobile services.

Staffers dedicated to selling phones have a desk where customers can sit to be served. They have received more than 40 hours of training and receive no incentives to sell one carrier over another.

Converted stores are generating 50 percent more connections per week, and the time it takes newly trained employees to activate services has declined to about 35 minutes, Mr. Score said.

The goal is to get to 15 minutes, he said. The pitch includes a promise that the store will be there to service the buyer for the life of the phone, he said.

And while Wall Street is starting to notice its wireless advances, analysts are more worried about the bigger picture. RBC Capital Markets analyst Scot Ciccarelli noted Best Buy Mobile's sales gains and said in a report that gross margins are double the corporate average. Still, the base is small, he said.

Goldman Sachs analyst Matthew J. Fassler last week reinstated a "sell" rating on Best Buy's stock, saying there are several risks that threaten its long-term earnings outlook. Among those: The price of TVs going down, growing mass-market competition from Wal-Mart and fading tax rebate benefits from the consumer.

Best Buy's timing coincides with AT&T's opening of dozens of stores this year on top of its 2,000 existing stores. AT&T, the No. 1 carrier, also has a lock on Apple's iPhone 3G.

Additionally, Wal-Mart is building bigger and better consumer electronics departments.

And there's no shortage of places to buy mobile devices and wireless service. No. 2 carrier Verizon has 2,400 stores and kiosks, No. 3 Sprint Nextel has 1,300, and No. 4 T-Mobile operates 1,500 stores and kiosks. Costco, Sam's Club and Target also sell wireless phones and service, and prepaid phones are even sold at 7-Eleven, not to mention RadioShack.

RadioShack

For years, wireless was a rich business for RadioShack's 4,400 stores. The chain was the first to negotiate contracts with carriers that gave it a steady stream of royalties from the cellphone customers it signed up.

Now, troubled Sprint is RadioShack's biggest wireless partner, and Sprint is expected to have a tough year.

RadioShack reports its second-quarter results today. Analysts forecast it will post a profit of 26 cents, a penny lower than year-ago earnings. While sales have been helped by $40 digital TV converter boxes, analysts said, earnings benefits from cost-cutting are going to be harder for chief executive Jim Day to find this year.

RadioShack may also disclose a new project today.

Deutsche Bank analyst Mike Baker quoted sources in a report Friday as saying RadioShack is building three test stores that will "replicate the look and feel" of Apple stores and open in October. Ten more stores are planned by year-end, 150 in the next 12 months and 400 in three years. The store name isn't likely to invoke the RadioShack brand, he said, and may include access to some wireless brands not carried by RadioShack such as T-Mobile, Verizon and AT&T.

RadioShack spokesman Charles Hodges said he couldn't comment on the report.

Source: Dallas Morning News

Best Buy's Vitelli Outlines Five-Point Growth Strategy

NEW YORK — Best Buy has a five-pronged growth strategy for meeting its lofty goal of doubling sales to $80 billion over the next five years.

Mike Vitelli, executive VP of the company's customer operating group, which oversees buying and merchandising, outlined the game plan for achieving 15 percent annual growth during an investor conference held here earlier this month by Oppenheimer & Co.

First, he said, the company believes it will continue to benefit from the CE industry's steady growth of 6 percent over time.

Second, Best Buy will increase its market share by opening new stores and by developing categories where it presently has limited share. These include Apple computers, a relatively recent brand addition; major appliances, which are benefiting from a differentiated assortment and a dedicated sales force with increased training; and mobile phones, which have been reinvigorated by a new business model developed with Carphone Warehouse.

The latter two categories are increasing from single-digit to double-digit growth, Vitelli said.

The third element is the introduction of new categories, such as musical instruments. While all Best Buy stores carry a smattering of keyboards and guitars, he said, the company is experimenting with extensive, "top-shelf" collections in several locations around the country.

A fourth growth engine is the development of completely new business models, such as the planned national rollout of Pacific Sales, the company's West Coast chain of premium appliance stores.

The final element is international growth. Best Buy has already established itself in Canada, China and Europe, and soon plans to open its first stores in Mexico and Turkey.

Separately, Vitelli said the company is working hard to engender more personalized service on the store level in order to combine the scale benefits of a national chain with the hands-on attention of an independent dealer.




Source: TWICE

Best Buy may rollout new appliances stores

(Jul. 16) A chain of California kitchen and bath showrooms may lead Best Buy into the home-remodeling business, according to comments made at the Oppenheimer & Co. Consumer Growth Conference on July 9. The Minneapolis-based company, known as one of the leading retailers in consumer electronics, told analysts it plans to double its revenues to $80 billion by 2013.

Those plans may involve a nationwide expansion of Pacific Sales, a California subsidiary that sells high-end appliances, plumbing fixtures and home furnishings in a showroom setting.

Mike Vitelli, executive vp-customer operating teams at Best Buy, gave several examples of new business models that will contribute to the $80 billion goal, because they are “completely different or outside of the Best Buy box.” One of them was Pacific Sales. “We believe [it] has opportunity across the country as well,” said Vitelli, whose division is responsible for merchandising and product assortment.

Best Buy purchased Pacific Sales in January 2006 for $410 million. The 14-unit chain, known for luxury brands like Sub-Zero, Miele, Toto and Viking, has since expanded to 22 units that sell to builders, contractors, designers and consumers.

“We have been taking market share [in appliances], and we stepped back and tried to reinvent the business for us,” said Ryan Robinson, Best Buy’s senior vp, CFO and treasurer, speaking to analysts at the Oppenheimer conference.

“We did it through assortment differentiation. A number of key vendors, including LG, Samsung, Siemens and Electrolux all viewed Best Buy as an ideal North American market entry partner and helped us create market differentiating offers for our partners.”

Source: Home Channel News

Target, Best Buy Debut at $400M Center

Stafford Park

STAFFORD TWP., NJ-Two major tenants at the $400 million Stafford Park here are scheduled to open their doors by the end of the month. Target will debut a 137,000-sf space and Best Buy will operate out of 30,162 sf. It is the first store in the Stafford Township market for both retailers.

The two stores join Costco, which opened last month. Costco and Target will anchor the 650,000-sf retail portion of the mixed-use development, which will consist of retail, residential and office space. Fellow retail tenants include Dick’s and PetSmart. According to Ed Walters, founder and partner of the Walters Group--the company developing the site--leases are also being negotiated with Vitamin Shoppe, Longhorn Steakhouse and T-Mobile.

Source: GlobeSt.

Construction of the Target building began in September 2007, and ground was broken on the 100,000 sf building that will house Best Buy, Dick’s and PetSmart in January of this year. Construction was preceded by a $31 million cleanup of the 370-acre site, where two landfills once stood.

"What we’re doing here is we’re bringing Target, Costco, Dick’s and Petsmart to o

Best Buy’s Vitelli Outlines Five-Point Growth Strategy

New York — Best Buy has a five-pronged growth strategy for meeting its lofty goal of doubling sales to $80 billion over the next five years.

Mike Vitelli, executive VP of the company’s customer operating group, which oversees buying and merchandising, outlined the game plan for achieving 15 percent annual growth during an investor conference held here this week by Oppenheimer & Co.

First, he said, the company believes it will continue to benefit from the CE industry’s steady growth of 6 percent over time.

Second, Best Buy will increase its market share by opening new stores and by developing categories where it presently has limited share. These include Apple computers, a relatively recent brand addition; major appliances, which are benefiting from a differentiated assortment and a dedicated sales force with increased training; and mobile phones, which have been reinvigorated by a new business model developed with Carphone Warehouse.

The latter two categories are increasing from single digit to double digit growth, Vitelli said.

The third element is the introduction of new categories, such as musical instruments. While all Best Buy stores carry a smattering of keyboards and guitars, he said, the company is experimenting with extensive, “top shelf” collections in several locations around the country.

A fourth growth engine is the development of completely new business models, such as the planned national rollout of Pacific Sales, the company’s West Coast chain of premium appliance stores.

The final element is international growth. Best Buy has already established itself in Canada, China and Europe, and soon plans to open its first stores in Mexico and Turkey.

Separately, Vitelli said the company is working hard to engender more personalized service on the store level in order to combine the scale benefits of a national chain with the hands-on attention of an independent dealer.

Source: Twice.com

Best Buy Plans to Double Sales in 5 Years

Minneapolis (June 26, 2008) Best Buy Co. expects to double its sales to $80 billion in the next five years, president and COO Brian Dunn said at the company's annual meeting on Wednesday, according to the Minneapolis/St. Paul Business Journal.

Best Buy doubled its revenue from $20 billion in fiscal 2003 to $40 billion in fiscal 2008. The company expanded from 679 stores to 1,314 during that time.

Best Buy anticipates revenue of $43 billion to $44 billion in fiscal 2009. It expects same-store sales to increase 1% to 3%.

In May, Best Buy entered a joint venture with Carphone Warehouse, which has more than 2,400 stores in nine European countries. It anticipates opening its first European Best Buy stores later this year.

The retailer also plans to add stores in China and expand into Mexico and Turkey.

Source: Chain Store Age

Big-box retailers undaunted by slow economy

LOS ANGELES (MarketWatch) -- Can big-box retailers keep growing briskly, given the current downturn in the economy? For the most part, yes, but it depends on what's inside the box.

While a select few retailing giants -- namely home-improvement retailers -- have had to curtail expansion plans, others are continuing as if recession talk is nothing more than idle chatter.

Companies like Target Corp. , Costco Wholesale Corp. and Best Buy Co. are carrying on with expansion plans at virtually the same pace as in years past.

"We continue to look at a standard of 100 net new stores a year," Target spokeswoman Anna Goeppinger said. In fact, Target's rate of expansion has quickened, as it built 118 new stores last year and is on pace for 116 this year. In 2005 and 2006, the company added 86 and 88 new stores, respectively.

For the most part, today's retail giants don't suffer in the same way that most retailers do when gasoline prices climb and pocketbooks get pinched. While they may make adjustments, they're big enough to absorb the shock, according to industry experts.

"They really are looking through the economic time because their stores will open after the bad economic times have passed," said Jim McComb, president of retail consultancy McComb Group based in Minneapolis, home to Best Buy and Target headquarters.

The biggest box of all, Wal-Mart Stores Inc. , is curtailing its expansion efforts, although company executives insist that it's not recession-related. The world's biggest retailer is beginning to saturate the North American market, so now it's looking to grow more quickly overseas.

Wal-Mart said as recently as October that it plans to completely phase out new construction of its conventional outlets by fiscal 2009 in favor of its grocery/discount-goods supercenter stores. Development of all new Wal-Mart outlets, including Sam's Club and its group of neighborhood markets, will eventually be cut to 190 by fiscal 2010, down from the 340 new locations that were opened last year.

The subsiding-expansion plans were formulated several years ago and there are no plans to alter them, said Wal-Mart spokesman Phillip Keene, even though economic conditions have worsened since they were outlined six months ago. In fact, the company is stepping up its international expansion efforts at a fairly brisk clip. "There's been no change from this outline," Keene added.

Home-improvement blues

That hasn't been the case with two major big-box home improvement retailers. Home Depot Inc. and Lowe's Cos. are feeling the pinch as the real-estate market drops and new-home building subsides.

Last month, Home Depot scrapped plans to put its first-ever store in San Francisco despite wrangling with reluctant city officials for nearly a decade. In 2005, the city's Board of Supervisors had approved the construction of a Home Depot, but the company backed off in light of rough economic conditions.

"We evaluated the deal and found that it no longer worked for us," said Home Depot spokeswoman Sarah Molinari.

Home Depot has curtailed much of its new-store building throughout North America, cutting back to 55 new stores this year from 100 last year. Capital-expenditure spending will be down 32% from a year ago, to $2.3 billion.

The company is looking to spruce up its existing stores and find ways to improve service, as well as invest in its supply chain, according to Molinari. She also said that much of the curtailing in Home Depot's expansion activity is that like Wal-Mart, the company is reaching market saturation.

At one point, Home Depot was building 200 new stores a year, Molinari elaborated.

That kind of pulse-quickening expansion is unlikely to return, it appears. "I just don't think we're at that point in our business. I think we're past that point," she added.

Lowe's, on the other hand, still is growing rapidly, though it has delayed the opening of 20 new outlets this year in markets where the housing crunch is acute, said spokeswoman Chris Ahearn. Most of the delays are in California and Florida markets.

The company still plans to open 120 other stores, she noted. Lowe's would not reveal precisely where it is holding off on construction. "Again, they're delays. We're not canceling stores," Ahearn said. "We still have an aggressive expansion plan."

Markets that didn't experience a massive housing bubble, such as Texas and Oklahoma, are still ripe for new properties. Lowe's has 1,525 outlets in all.

Urban problem

Home Depot's San Francisco experience exemplifies the dilemma now faced by home-improvement centers. Buying or leasing land in pricey urban areas will cut deeply into their return on investment, said Craig Johnson, president of Customer Growth Partners, a retail consultant.

When economic conditions weaken, that takes a lot of steam out of a Home Depot or Lowe's that is looking to venture outside its comfort zone of suburban strip malls.

"Even in good times, it's a reach," Johnson added.

Companies that seem to be clinging to good times are Best Buy, Costco and Target. Best Buy said that it could stand to build another 500 stores in its various markets, so it plans to open 130 to 160 of them over the next fiscal year. That's about the same pace at which Best Buy has grown over the past several years, according to company spokeswoman Sue Busch.

Best Buy is hoping to use the current economic situation to its advantage and to expand its market share as some of its rivals retreat. "Right now, this is where the focus is," Busch said.

Its main competitor, Circuit City Stores Inc., has seen its stock price tumble, and it has become a takeover target for Blockbuster Inc.

"Smart retailers will use down markets as the most cost-effective time to build market share," Johnson commented. "I think Best Buy is doing a very good job of this."

The same goes for Costco, Johnson said. The membership-warehouse retailer may be seeing its nonfood sales drop, but its food and low-price gasoline have grown more attractive to consumers.

The company plans to open 30 to 35 new units this year and to relocate 10 more stores, spokesman Bob Nelson said.

Costco should continue on that pace in the foreseeable future. "We have no plans to curtail next year," he added. "We're cautiously optimistic that things are going to get better."

Source: MarketWatch.com

Best Buy's quarter encourages bulls

NEW YORK (MarketWatch) -- Along with flat-screen television sets and GPS devices, Best Buy Co. is in the business of selling optimism.

The biggest U.S. electronics retailer (BBY:
Best Buy Co., Inc (BBY 43.94, +0.47, +1.1%) posted better-than-expected results Wednesday, cheering investors, and it gave an upbeat forecast for the current year. See full story.
Sure, part of the reason the results looked good was that they beat the company's reduced outlook, but the targets it set for the year -- particularly the comparable-store-sales gain of 1% to 3% -- invigorated investors and analysts who had expected a bleaker view.
"Some are asking if we're too aggressive in setting our comp guidance in the 1%-to-3% range," Best Buy executive Shari Ballard said on the conference call with analysts. "I'm going to spend my time with you doing my absolute best to answer the question and to tell you why I believe the answer is, no, we absolutely did not set our guidance too high."
After the market rally Tuesday, some commentators were predicting an economic turnaround, add in some decent job numbers and upswing in a discretionary category such as consumer electronics, the coming economic stimulus checks, and a bull market is right around the corner ...right?
But it's too soon to celebrate. The most recent earnings report aside, Best Buy is still facing a tough environment.
Many people who would be inclined to buy, say, a big-screen TV bought it back when the economy was rosy and the credit vein was easily tapped. Purchases like that seem reckless at best when people are scrambling to afford basic goods and are fretting over mortgage payments. Best Buy, which has done well in highlighting its superior service proposition instead of low prices, might see some of its potential customers defect to discounters.

Source: Marketwatch

Circuit City to run with "The City"

NEW YORK (MarketWatch) -- Circuit City Stores Inc., which lost more than one-quarter of its stock value after posting a wider loss than expected, is hoping that a new store concept two years in development will be a turning point for the company

Circuit City (CC) this year opened seven "The City" stores, including one in New York separated only by a wall from a store operated by its larger and better-performing rival, Best Buy Co.

Best Buy Co., Inc. (BBY) The 20,000-square-foot concept is at least one-third smaller than its standard 30,000 to 35,000 square-foot stores, the company said.

The new concept also will be where it allocates capital spending. Circuit City had 681 U.S. locations at the end of its third quarter and plans to open as many as 60 The City stores next year.

Circuit City, which analysts said has lost sales and traffic to Best Buy and others partly because of aged stores and lackluster customer service, said that the City is cleaner and more brightly lit. The concept also showcases digital cameras and other products in round pods, offering customers a more desirable retail experience.

"The City is more than just a better-looking store," said Chief Executive Philip Schoonover on a conference call Friday. "We have data that show both the customers and associates prefer this experience to our older stores. Customer-shopping patterns have changed a lot. They are looking for full service."

At the City, employees are armed with tablet PCs to help answer customers' questions and are trained to handle different tasks and sell various product categories throughout the store, instead of only being assigned to one product category. Almost all of the fixtures are on wheels and can be easily taken apart to quickly feature different merchandise. In addition, the concept has portable price scanners for customers to check on product information and price.

The new City stores also use more of their footprint. While 400, or under two-thirds of the company's stores only use up to 60% of the stores as selling space, the City takes 85% of its floor.

While the City marks a step in the right direction, some analysts commented that Circuit City has higher priorities. "The initial read on the City stores is that management understands what it takes to be competitive in the industry," said Scott Tilghman of Soleil Securities. "But I don't think it'll be the driver of the turnaround."

On Friday, the retailer reported that its third-quarter loss widened after weakness in product categories from traditional TV sets and desktop computers to more-profitable warranty-service programs. Discounts on flat-panel televisions also dented profit. Circuit City said that it may expect a loss in the fourth quarter, when analysts were expecting profit of 56 cents a share. See full story.

"They have bigger problems than coming up with new store concepts," said Pali Research analyst Stacey Widlitz. "It's innovative, but they need to work on their current store base."

The new stores have yet to prove they can help Circuit City. Joe Feldman, a Telsey Advisory Group analyst whose office is right near the City on Fifth Avenue in New York, said that the Best Buy store next door is generally more crowded and open longer hours.

"They've got a long way to go," Feldman added. "It's going to take a long time to turn things around."

Source: MarketWatch