Best Buy Reduces Forecast Citing Sales; Stock Falls (Update6)
Best Buy Reduces Forecast, Citing Sales; Stock Falls (Update6)
By Kevin Bell
Feb. 15 (Bloomberg) — Best Buy Co., the largest U.S.
consumer-electronics chain, cut its full-year profit forecast on
lower sales of digital cameras, video games and home theaters.
Best Buy dropped 2.5 percent in New York trading, the
biggest decline in 10 days.
The U.S. economy slowed after the Christmas holiday, as
Americans grappled with gasoline prices topping $3 a gallon and
a housing market slump. Confidence among consumers this month
fell to the lowest level since 1992, according to a
Reuters/University of Michigan index.
“There has been a discernible decline in consumer
spending,;; said Scot Ciccarelli, a New York-based analyst with
RBC Capital Markets. “We;re seeing it from a pretty broad swath
of retailers, whether it;s Wal-Mart, Best Buy, auto parts or
apparel.;;
Sales at Best Buy stores open at least 14 months will
“decline modestly;; in the fourth quarter, the Richfield,
Minnesota-based company said today in a statement. The last time
sales in older stores fell in any quarter was in the three
months ended November 2002, according to data compiled by
Bloomberg.
Earnings may be $3.05 to $3.10 a share for the year ending
March 1, down from a previous range of $3.10 to $3.20, the
retailer said. Analysts surveyed by Bloomberg estimated $3.17,
on average.
Best Buy fell $1.15 to $44.62 at 4:01 p.m. in New York
Stock Exchange composite trading. Circuit City Stores Inc., the
second-biggest U.S. electronics retailer, dropped 25 cents, or 5
percent, to $4.79. So far this year, Best Buy has declined 15
percent, and Circuit City has fallen 14 percent.
Chief;s View
“Soft domestic customer traffic in January, coupled with
our near-term outlook, now indicate that our fourth-quarter
revenue will fall short of our planned targets,;; Chief
Executive Officer Brad Anderson said in the statement. “Our
December revenue results were in line with our expectations.;;
Sales rose 1.5 percent in December at older stores. That
was the slowest pace in five years as consumers began to rein in
spending.
Best Buy said it;s still optimistic about the electronic
retail business, and plans to open as many as 160 stores around
the world in the year to March 2009. Retail space will increase
10 percent to 51 million square feet by the end of that year, it
said.
“Everything that Best Buy sells is discretionary,;;
Anthony Chukumba, an analyst at FTN Midwest Securities Corp. in
New York, said in an interview on Bloomberg Television. “No one
has to buy a flat-screen television or an iPod.;; Chukumba
recommends that clients buy Best Buy shares.
Strong January
January is usually a strong month for consumer-electronics
retailers, Ciccarelli of RBC Capital Markets said.
The Feb. 3 Super Bowl has been the biggest driver of U.S.
high-definition television purchases for the past three years
and is expected to generate sales of about 2.4 million sets this
year, the Consumer Electronics Association said Feb. 1.
“Best Buy has been gaining market share, so for them to
come out and say sales are light means sales are light for
everybody,;; said Ciccarelli, who said Best Buy is a “top
pick.;; “I don;t think you;re going to see any near-term pick
up.;;
To contact the reporter on this story:
Kevin Bell in Toronto at
