Nov. 12 (Bloomberg) -- Best Buy Co. dropped 8 percent in New York trading after the U.S. electronics retailer said profit and sales will fall more than it expected during what may be the worst holiday shopping season in at least 23 years.

Earnings for the year through February 2009 may drop to $2.30 to $2.90 a share, Richfield, Minnesota-based Best Buy said today in a statement. Revenue from stores open at least 14 months might plunge as much as 15 percent in the four months through February.

``Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen,'' Chief Executive Officer Brad Anderson said in the statement. ``Best Buy simply can't adjust fast enough to maintain our earnings momentum for this year.''

Best Buy's forecast signals consumers grappling with rising jobless rates and declining home values have stopped buying non- necessities as the holidays approach. Rival Circuit City Stores Inc. filed for bankruptcy protection Nov. 10, while department- store chains Macy's Inc. and Nordstrom Inc. also projected sales and profit declines, as the U.S. economy slumps in what may be the worst recession in three decades.

``Discretionary consumer spending has slowed dramatically,'' Colin McGranahan, an analyst at Sanford C. Bernstein & Co. in New York, said in an interview. ``Best Buy's a great company, but it doesn't matter if people are not out buying TVs and PCs, which they weren't.''

Holiday sales at older stores may decrease 1 percent from last year, according to a survey released today by America's Research Group and UBS AG. America's Research Group founder Britt Beemer said that's his first negative forecast in 23 years of conducting Christmas surveys.

Shares Plunge

Best Buy lost $1.91 to $21.97 at 4 p.m. in New York Stock Exchange composite trading. They have plunged 58 percent this year, exceeding the 42 percent drop by Standard & Poor's 500 Index. The company runs about 1,000 Best Buy, Best Buy Mobile and Geek Squad stores in the U.S. and has locations in Canada and China.

Full-year sales may rise to $43.7 billion to $45.5 billion, the company said. Best Buy, the largest U.S. electronics retailer, forecast in September adjusted full-year profit of $3.25 to $3.40 a share on revenue of $47 billion. Analysts surveyed by Bloomberg estimated profit of $3.04 on sales of $46.4 billion.

Annual Sales

Annual same-store sales may drop 1 percent to 8 percent. The U.S. dollar's advance likely will hurt sales and profit from international stores more than planned, Best Buy said.

``They're not really telling us anything that people didn't already know,'' McGranahan said. The fourth quarter accounts for about 35 percent of full-year sales and 55 percent of earnings per share, he estimated today in a research note.

Spending declines accelerated in the first part of October after the Wall Street meltdown and increased job cuts led consumers to forgo most purchases. U.S. unemployment rose in October to 6.5 percent, the highest level since 1994, according to the Labor Department.

Economists surveyed by Bloomberg News believe the economy will shrink at a 3 percent annual rate in the fourth quarter and decline at a 1.5 percent pace in the first three months of 2009, resulting the longest slump since 1974-75.

`Difficult Times'

``In 42 years of retailing, we've never seen such difficult times for the consumer,'' Brian Dunn, Best Buy's president and chief operating officer, said in the statement. ``People are making dramatic changes in how much they spend, and we're not immune from those forces.''

Circuit City filed for bankruptcy after suppliers cut off credit and demanded cash for shipments. The chain lost market share to Best Buy and Wal-Mart Stores Inc., while Amazon.com Inc. and other online retailers undercut it with lower prices.

Best Buy's new forecast doesn't look like it had ``much, if any, impact from Circuit City store closures,'' said McGranahan. He recommends investors hold Best Buy shares.

Comparable-store sales declined 1.3 percent in September, then widened to a 7.6 percent drop in October, Best Buy said. The company said it gained market share in most product categories during the two months. Best Buy sells computers, televisions, digital cameras, appliances and DVDs.

Wal-Mart, the world's biggest retailer, isn't a factor in Best Buy's announcement, said McGranahan. Best Buy has been adding customers from Circuit City as well as CompUSA Inc. and Tweeter Opco LLC, which have liquidated, he said. Best Buy's sales in early November may have stabilized ``but still remain significantly weak,'' he wrote.

Best Buy said it's started to ``adjust its cost structure.'' Third-quarter inventory, short-term borrowings and accounts payable will be higher than planned because of the ``rapid downturn'' in consumer spending, the retailer said. U.S. supplies may be flat by the end of its fiscal year, it said.

Best Buy plans to report third-quarter earnings on Dec. 16. A week of shopping after the U.S. Thanksgiving holiday on Nov. 27 will shift into the fourth quarter, hurting third-quarter same-store sales.

To contact the reporter on this story: Heather Burke in New York at hburke2@bloomberg.net.

Last Updated: November 12, 2008 16:19 EST