Tags: Best Buy | Dismal | Sales | Raise | Holiday | Shopping | Concerns

Best Buy's Dismal Sales Raise Holiday Shopping Concerns

Tuesday, 14 Dec 2010 11:33 AM

Best Buy surprised investors with a drop in quarterly sales at existing stores and lower-than-expected earnings as demand for televisions plunged, sending shares down more than 14 percent.

The results from the largest U.S. electronics chain also pressured shares of competitors like Radioshack Corp., television manufacturers like Sony Corp. and television components makers like Corning Inc. and raised concerns about demand for gadgets in the all-important holiday season.

The lackluster report from the retailer seen as a bellwether in consumer electronics cast a shadow on the strength of the recovery in the consumer-driven U.S. economy, standing in contrast to better-than-expected November retail sales reported by the commerce Department on Tuesday.

"Best Buy did not go deep enough discounting in TVs on Black Friday, likely the result of their desire to protect gross margins. We believe the mass merchants, particularly Target, were the incremental share gainers this year," Janney Capital markets analyst David Strasser said.

On Black Friday, Chief Executive Brian Dunn had pointed to a longer line of shoppers outside stores.

But analyst Strasser said the company's focus on wireless phone sales may have hurt performance in stores during that kickoff to the holiday shopping season.

"Wireless is a tough product to sell on busy days, and that was a big focus for the company," he said.

Best Buy also pointed to a decline in its U.S. market share.
In its second holiday season after the bankruptcy of archrival Circuit City, Best Buy faces stiff competition from online retailer Amazon.com and discounters such as Wal-Mart Stores Inc. and Target Corp.

The company estimated its domestic market share fell 1.1 percentage points in the quarter compared with a year earlier. It tied the decline to weakness in TVs, mobile computing and gaming software.

The company said tepid demand for televisions and entertainment hardware and software contributed to its weakness in the domestic segment.

For fiscal 2011, Best Buy cut its profit outlook to about $3.20 to $3.40 a share, down from a prior forecast of $3.55 to $3.70.

In the fiscal third quarter that ended Nov. 27, net profit was $217 million, or 54 cents a share, compared with $227 million, or 53 cents a share, a year earlier. Analysts on average forecast 61 cents a share, according to Thomson Reuters I/B/E/S.

Sales fell 1 percent to $11.89 billion, missing analysts' average estimate of $12.45 billion. Domestic comparable-store sales declined 5 percent, hurt by lower demand in key categories and market share losses.

Best Buy shares were down 14.3 percent at $35.72 on the New York Stock Exchange.

© 2017 Thomson/Reuters. All rights reserved.

 
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Best Buy surprised investors with a drop in quarterly sales at existing stores and lower-than-expected earnings as demand for televisions plunged, sending shares down more than 14 percent. The results from the largest U.S. electronics chain also pressured shares of...
Best Buy,Dismal,Sales,Raise,Holiday,Shopping,Concerns
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2010-33-14
Tuesday, 14 Dec 2010 11:33 AM
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