Best Buy Cites ‘Most Difficult Climate’ for Fiscal Downgrade12 Nov, 2008 By: Erik Gruenwedel
The other shoe fell on consumer electronics when market leader Best Buy Co. Nov. 12 said it would lower its fiscal-2009 earnings and revenue guidance.
The Minneapolis-based retailer said same-store (open at least 14 months) sales in October declined 7.6%, following a 2.4% decline in September. Through the current third quarter, Best Buy is on pace to drop 4.7% in same-store sales.
In addition Best Buy said “uncertainty regarding consumer spending” entering the critical holiday shopping season brought on by “seismic changes” in the financial markets and macroeconomic climate had limited its ability to project revenue through the end of the year.
The retailer said same-store sales to the end of the fiscal year next February could fall from 5% to 15%, with global revenue from $43.7 billion to $45.5 billion.
Best Buy is a central player in consumer adoption of Blu-ray, and considered the largest retailer of Blu-ray movies, with more than 800 titles.
The news comes just days after No. 2 CE retailer Circuit City Stores filed for Chapter 11 bankruptcy protection.
“In 42 years of retailing, we’ve never seen such difficult times for the consumer,” said Brian Dunn, president and COO of Best Buy. “People are making dramatic changes in how much they spend, and we’re not immune from those forces.”
The company said it was implementing adjustments to discretionary spending and inventory, including discussions with key vendors.
“We can’t change the overall level of consumer spending, but we can focus on deepening our relationships with customers wherever we interact with them,” said Brad Anderson, vice chairman and CEO.
Dunn said Best Buy would continue to focus on a consumer-centric retail strategy underscored by Circuit City’s bankruptcy.
“Given recent announcements by competitors, we believe we have even greater potential to serve new customers and capture market share in the months ahead,” he said.
Analyst Stacey Widlitz with Pali Capital in New York wasn’t as charitable. She said Best Buy’s earnings range was so wide “you run a truck through it.”
The analyst said shrinking credit available to consumers by their credit card holders could have a negative impact on HDTV sales, which she said are 80% purchased with credit cards and represent 25% of Best Buy’s revenue.
“Credit may be the new Grinch that stole Christmas,” Widlitz wrote in a note.
Separately, Best Buy said beginning Nov. 17 it would begin rolling out (with the National Association of Broadcasters) in-store workshops in the 25 largest cities aimed at educating consumers about next year’s transition to digital television.
Best Buy reports third-quarter results Dec. 16.