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 kbell2@bloomberg.net.

Last Updated: February 15, 2008 18:26 EST