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Best Buy Narrows 2009 Profit Forecast

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The Associated Press

Published: January 10, 2009

NEW YORK - Best Buy Co., the nation's largest consumer electronics chain, narrowed its fiscal 2009 adjusted earnings forecast Friday and said it will take an approximately $60 million fourth-quarter charge related to some employee buyouts.

The Richfield, Minn.-based company is trying to control costs and inventory as consumer anxiety grows about the recession and job losses.

The pullback by shoppers, which has hurt a wide swath of retailers, has been so sharp that Best Buy hasn't been able to take advantage of its largest rival's weakness.
Circuit City Stores Inc. filed for Chapter 11 bankruptcy protection in November because of slowing sales and mounting debt. The nation's second-largest electronics retailer said Friday that it was in talks with two "interested parties" that could buy the company or provide additional financing for it to stay in business.
Best Buy said it now expects adjusted profit between $2.50 and $2.70 a share for its fiscal year that ends in February. It previously projected earnings in a range of $2.30 to $2.90 a share.

The updated outlook reflects a likely 2 percent to 3 percent decline in same-store sales, an important retail industry metric, that compares sales figures for stores open at least a year. Best Buy's outlook excludes an $111 million third-quarter charge for expenses related to the buyouts and other restructuring charges.

Analysts polled by Thomson Reuters predict net income of $2.61 a share. Analysts' estimates typically exclude one-time items.

Aside from its revised guidance, Best Buy reported December's same-store sales fell 6.5 percent. A decline in foot traffic was partially offset by higher average sales.

Within its domestic unit, Best Buy reported strong same-store sales in flat-panel TVs and notebook computers as well as cell phones and accessories. The overall consumer electronics segment, which made up 44 percent of the month's domestic revenue, reported an 8.7 percent decline in same-store sales.

According to figures released this week by SpendingPulse, a data service of MasterCard Advisors that estimates U.S. retail sales across all payment forms including cash and checks, electronics and appliance sales dropped 21.4 percent from Nov. 30 through Jan. 3.
Best Buy said revenue for the fiscal month that ended Jan. 3 climbed 4 percent to $7.5 billion. Sales at its Web site surged about 34 percent as shoppers continued moving to the Internet for their holiday purchases.

The company's stock fell $1.57, or 5.3 percent, to close at $28.08. The shares are off about 30 percent since Nov. 28, which was last year's "Black Friday," the traditional kickoff to the holiday shopping season.

On Thursday, Best Buy said about 500 corporate employees had accepted buyouts that were offered in December. The reductions represent about 12.5 percent of the 4,000 workers at its headquarters.

Last month Best Buy reported its third-quarter profit slid 77 percent and called the period the most challenging in its history.

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