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Best Buy widens lead over main rival

Circuit City posts loss as store closings loom

Best Buy plans to spend up to $850 million this year on new stores and other plans and may soon open test stores in Mexico and Turkey. Best Buy plans to spend up to $850 million this year on new stores and other plans and may soon open test stores in Mexico and Turkey. (ROSS D. FRANKLIN/ASSOCIATED PRESS)

MINNEAPOLIS -- Everyone knew Circuit City was having a bad fourth quarter. Which made Best Buy's good one a bit of a surprise.

Results reported yesterday by the nation's two largest electronics chains showed Best Buy increasing its lead over its smaller rival, with profit up 18 percent. Circuit City lost money.

While Best Buy profits from its operations outside the United States, including China, and a major push into selling installation and advice in addition to TVs and iPods, Circuit City is closing Canadian stores and replacing 3,400 workers with cheaper help.

"I think Best Buy is just executing on all fronts. They're clearly the winner in this space," said Joseph Feldman, of Telsey Advisory Group.

Both have their challenges. Price competition is fierce for their most important product, high-end TVs. And sales of compact discs have been falling. But initiatives Best Buy started a few years ago, such as its international operation and its Geek Squad tech support service are helping.

Circuit City will close 62 company-owned stores in Canada. And its layoffs of 3,400 of its most experienced (and expensive) sales workers, announced last week, have left some analysts wondering whether it is losing its best sales people when it most needs them.

Circuit City Stores Inc.'s $12.2 million quarterly loss stemmed from restructuring charges, though store closings and slow sales growth also hurt.

Best Buy Co. Inc. earned $763 million, or $1.55 per share, in the quarter ended March 3.

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