UPDATE 3-Circuit City posts big loss, withdraws outlook

(Adds analyst comment, company react, paragraphs 7-8, edits)

By Karen Jacobs

ATLANTA, Sept 29 (Reuters) - U.S. electronics retailer Circuit City Stores CC.N posted a wider quarterly loss and withdrew its financial outlook on Monday as it reviewed its business ahead of the holiday shopping season, sending its shares plummeting 17 percent.

The company, which saw the departure of its chairman and chief executive officer last week, said it could close stores as part of a turnaround plan, and added it would suspend store openings during the 2010 fiscal year.

"These guys face a big uphill climb," said Joe Feldman, managing director of Telsey Advisory Group. "The busiest time of the year is fast approaching and are they going to be able to execute properly is going to be a big concern."

Retail forecasters are predicting that 2008 will be one of the bleakest holiday sales periods in years, as the U.S. housing slump, credit crisis and job losses force consumers to rein in spending.

The Richmond, Virginia chain has been trying to rebuild profitability and restore investor confidence over the past year in the face of intense competition from Best Buy Co (BBY.N), which has been gaining market share in key electronics categories.

Circuit City has posted losses for five of the past six quarters, and sales have fallen for more than a year.

"The risks of bankruptcy are very real, in our opinion," Stifel Nicolaus analyst David Schick said in a research note. He added that suppliers "will have to decide how they plan to do business at Circuit City."

Analysts have expressed concern about both the health of Circuit City's balance sheet and whether vendors have tightened credit terms. Cash and short-term investments fell to $92.5 million as of Aug. 31, from $424.4 million a year earlier, as the company bought property and equipment and had the loss from operations.

Circuit City spokesman Bill Cimino said the retailer has adequate liquidity under an existing credit facility to support its turnaround.

The retailer's second-quarter net loss was $239.2 million, or $1.45 a share, compared with a loss of $62.8 million, or 38 cents a share, a year earlier.

Excluding charges, the loss came to $1 a share, compared with a loss of $1.04 expected by analysts on average, according to Reuters Estimates. Gross margin improvement helped contain the loss as the company controlled merchandise theft.

But total sales sank nearly 10 percent to $2.39 billion, short of the $2.5 billion analysts expected, as lower U.S. sales offset a rise internationally.

Sales at stores open at least a year, or same-store sales, fell 13.3 percent, hurt by lower results in major categories including televisions, computers and video games.

BUILDING TO HOLIDAY SEASON