Best Buy posts higher profit

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ATLANTA -- Best Buy Co. reported a better-than-expected 52% jump in third-quarter profit on Tuesday on strong sales of laptops and video games, and raised its full-year earnings forecast.

But its shares fell as much as 4.6% as the company said results in the current quarter would be pressured by calendar changes. Shares of rival Circuit City were down 5%.

"Next quarter won't be as sparkling as Wall Street expects," said Alan Lancz, president of investment advisory firm Alan B. Lancz & Associates in Toledo, Ohio.

He added that Best Buy was making the right moves longer term, with its international expansion and move into higher-margin products.

"Best Buy is an excellent example of a company that is taking advantage of its competition," Lancz said.

During a conference call, Best Buy said its full-year forecast would imply fourth-period profit in a range of $1.70 to $1.80 a share, below the $1.82 a share expected by analysts according to Reuters Estimates.

For the third quarter ended Dec. 1, earnings rose to $228 million, or 53 cents a share, from $150 million, or 31 cents a share, a year earlier.

Analysts' average expectation was 41 cents a share, according to Reuters Estimates.
Revenue increased 17% to $9.9 billion, topping the $9.4 billion analysts expected. Sales at stores open at least 14 months, or same-store sales, rose 6.7%.

Best Buy said sales were helped by a calendar shift that added an extra week of sales after the Thanksgiving Day holiday, which typically brings increased customer traffic.

It also cited increased sales of big-ticket items such as video gaming consoles, notebook computers, navigation devices and flat-panel televisions.

U.S. revenue rose 15%, while international sales jumped 32%.

Best Buy said sales growth in the current quarter was expected to moderate from the third quarter. It cited the extra week that boosted third-quarter sales, and said the fourth quarter includes 13 weeks versus 14 a year earlier.

"The calendar shift that helped in (the third quarter) will hurt in (the fourth quarter), and (cost) leverage will be harder to achieve," Sanford Bernstein analyst Colin McGranahan said in a research note.

In the third quarter, the entertainment software and home office categories posted the highest sales growth, Best Buy said. In the TV segment, double-digit growth in flat-panel sets was offset by lower sales of projection and tube TVs.

Same-store sales fell 1.8% for appliances, hurt by the weak U.S. housing market.
Minneapolis-based Best Buy and Circuit City Stores Inc. face challenges as the housing slowdown and rising fuel and food costs pressure consumers.

But Best Buy has been luring shoppers by focusing more intensely on consumer needs, and is expected to be a key beneficiary this holiday season as consumers buy electronics. The retailer makes 70% of its full-year earnings in the second half.

"We believe we are profitably growing our market share," president Brian Dunn said in a statement.

Best Buy said it now expects full-year earnings of $3.10 to $3.20 a share, up from a September forecast of $3 to $3.15.
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