Best Buy cuts year forecast as sales soften
ATLANTA (Reuters) - Top electronics retailer Best Buy Co <BBY.N> cut its full-year outlook on Friday, saying fourth-quarter sales would miss its expectations as the softer U.S. economy hurt January store traffic, pushing its shares down 3 percent.
Lower revenue for advanced televisions, MP3 devices and video games will result in a modest fall in sales at stores open at least 14 months, or same-store sales, Best Buy said.
"The macroeconomic environment grew more challenging after the holidays," Jim Muehlbauer, interim chief financial officer, said in a statement. "Our post-holiday results are not going to be what we originally expected."
Shopper traffic declined in January as U.S. consumers hesitated to part with their dollars in the face of higher food and fuel costs and a slowing housing market, the company said.
Best Buy now expects to earn $3.05 to $3.10 a share for the year that ends March 1, down from a forecast of $3.10 to $3.20 a share given in December. Analysts on average expect full-year earnings of $3.17 a share, according to Reuters Estimates.
Best Buy said it expects sales of nearly $40 billion for fiscal 2008 on same-store sales growth of 2.5 to 3 percent. It had previously forecast same-store sales to rise about 4 percent.
"If the quality and segment leader is struggling, one can only imagine how poorly others in the space are doing, with (main rival) Circuit City <CC.N> being top of mind," Credit Suisse analyst Gary Balter said in a research note.
Richmond, Virginia-based Circuit City Stores has posted losses over the past year and is aggressively cutting costs in a bid to restore profitability.
Stifel Nicolaus analyst David Schick downgraded Best Buy to "hold" from "buy," citing the slower spending.
Although Best Buy has gained market share from Circuit City and Sears Holdings <SHLD.O>, the profit warning suggests "2008 will see a lack of (same-store sales) traction despite what we feel are significant, durable competitive advantages within the business," Schick said in a research note.
Best Buy said it would open 85 to 100 new stores in the United States and 40 to 50 stores internationally in the fiscal year that ends in 2009 -- moves that will add 12,000 retail jobs in various areas.
The majority of the U.S. store openings would be in existing markets, and are expected in time for the 2008 holiday shopping season, the company said.
The global store openings are scheduled for Canada, China and Mexico, Best Buy said. The retailer expects to enter Turkey during its 2010 fiscal year.
Best Buy shares were off $1.36 to $44.41 while Circuit City shares were off 29 cents, or 5.8 percent, to $4.75 in afternoon New York Stock Exchange trading. Best Buy's stock has fallen 12 percent in the past year while Circuit City shares have plummeted 78 percent.
(Additional reporting by Aarthi Sivaraman in New York)
(Reporting by Karen Jacobs; Editing by Mark Porter)