Best Buy Co., the world’s largest consumer electronics retailer, forecast full-year profit that trailed some analysts’ projections, citing economic challenges.
Excluding the effect of restructuring costs and stock buybacks, profit will be $3.30 to $3.55 a share, the Richfield, Minnesota-based company said today. Analysts on average projected $3.55, according to a Bloomberg survey.
Consumers are facing increasing pressures from unemployment and higher gas prices, which may lead them to curb spending, Chief Financial Officer Jim Muehlbauer said today on a conference call. Best Buy has posted back-to-back quarters of revenue declines as the competition for television bargain hunters escalates among retailers.
“The TV category is going to be very tough in the first half of the year,” David Strasser, an analyst at Janney Montgomery Scott in New York, said today in an interview. He rates Best Buy as “buy” and estimated that TVs account for about 15 percent of sales. “There’s been little excitement to generate interest.”
Best Buy declined $1.72, or 5.4 percent, to $30.13 at 4 p.m. in New York Stock Exchange composite trading, the most in three months. The shares have slipped 12 percent this year.
Net income fell 16 percent to $651 million, or $1.62 a share, in the quarter ended Feb. 26. Excluding items such as costs to close stores in China, earnings were $1.98 a share. Analysts predicted $1.84, the average of estimates in a Bloomberg survey.
Discounts helped boost comparable-store sales of smartphones as competition from Amazon.com Inc. and Wal-Mart Stores Inc. (WMT) led to falling TV sales in Best Buy locations open at least 14 months. Best Buy Chief Executive Officer Brian Dunn is reorganizing stores and retraining employees to push sales of gadgets that work together.
“Consumers are clearly telling us that they are interested in capturing all the benefits of a connected lifestyle, but they are also selective about how and where they spend,” Muehlbauer said. Sales in the second half probably will improve compared with the first as the company invests in its mobile business, he said.
Fourth-quarter revenue fell 1.8 percent to $16.3 billion. In the year-earlier quarter, net income was $779 million, or $1.82.
Best Buy said last month it would close all of its nine Best Buy branded stores in China to focus on expanding the more profitable domestic chain it acquired five years ago, while reducing costs in its U.S. supply-chain operations.
Tapping demand for mobile devices, Best Buy plans to open about 150 Best Buy Mobile stores in the U.S. in fiscal 2012, according to a Feb. 21 statement. It plans to slow the opening of its large-format namesake stores.
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