Best Buy Cuts Forecast as Quarterly Profit Falls 4.4%
Best Buy Co., the world’s largest consumer-electronics retailer, lowered its annual earnings forecast and reported an unexpected 4.4 percent drop in third- quarter profit, citing weaker demand for televisions and entertainment gadgets in the U.S.
Net income fell to $217 million, or 54 cents a share, in the three months ended Nov. 27, from $227 million, or 53 cents, a year earlier, the Richfield, Minnesota-based company said today in a statement. Analysts projected 60 cents, the average of 24 estimates compiled by Bloomberg. The shares sank.
Best Buy said its U.S. market share for the full year will decline because of weaker-than-expected sales of televisions, computers and video game software. The retailer and rivals including Wal-Mart Stores Inc. have cut prices for electronics to lure U.S. consumers pinched by unemployment.
“The U.S. business was pretty miserable,” Joe Feldman, an analyst at Telsey Advisory Group in New York, said in an interview, referring to Best Buy. “Sales are going to places like Amazon, Wal-Mart, Target, Costco and Sears.”
Full-year profit will drop to $3.20 to $3.40 a share, reduced from a previous forecast of $3.55 to $3.70. Analysts predicted $3.59, on average. The company earned $3.10 last year.
Third-quarter sales fell 1.1 percent to $11.9 billion last quarter, missing the $12.4 billion average of analysts’ estimates.
Best Buy tumbled $5.64, or 14 percent, to $36.06 at 9:21 a.m. before the opening of the New York Stock Exchange. Before today, the shares had increased 5.7 percent this year.
Industrywide sales at U.S. retailers rose more than forecast in November as holiday shopping got under way. Purchases increased 0.8 percent, following a 1.7 percent gain in October that was larger than previously estimated, according to Commerce Department figures released today in Washington. The median forecast of economists surveyed by Bloomberg News was a 0.6 percent rise.
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