Just days after consumer electronics rival Circuit City filed for Chapter 11 bankruptcy protection, Best Buy, the nation's top retailer in that market, cut its full-year profit forecast due to weakening consumer spending. Best Buy cited "recent turmoil in the financial markets and other macro-economic factors" for the lowered forecast.
Best Buy Wednesday said its global comparable store sales, which measures sales at stores open for at least 14 months, dropped by 7.6 percent for fiscal October, following a modest comparable store sales dip of 1.3 percent in fiscal September.
"Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen," Best Buy Vice Chairman and CEO Brad Anderson said in a statement. "Best Buy simply can't adjust fast enough to maintain our earnings momentum for this year. We're beginning to adjust our cost structure to restore earnings momentum and still gain market share. We firmly believe that our strategy of customer centricity is of great value in driving our performance vs. the industry, and that's the strategy we plan to pursue to continue to strengthen our position in the marketplace."
Slumping sales and waning consumer confidence also prompted Best Buy to forego projecting its revenue for the ever-important holiday shopping season, a November-to-December window that usually bulks up retailers' annual profits and sales by as much as 50 percent. Instead, Best Buy offered its revenue guidance for the remainder of fiscal 2009.
"In 42 years of retailing, we've never seen such difficult times for the consumer," said Brian Dunn, Best Buy president and COO, in a statement. "People are making dramatic changes in how much they spend, and we're not immune from those forces."
According to Best Buy, the changing consumer and competitive landscapes have prompted the company to provide a wider range of guidance. Best Buy said Wednesday it anticipates that comparable store sales for the four months remaining in fiscal 2009 could drop between 5 percent and 15 percent, resulting in an annual comparable store sales decline of 1 percent to 8 percent.
Minneapolis-based Best Buy said it expects earnings for the year to be between $43.7 billion and $45.5 billion, or between $2.30 and $2.90 a share. Best Buy had previously provided earnings guidance of $3.25 to $3.40 per share for fiscal 2009, based on an annual comparable store sales increase of 2 percent to 3 percent.
Best Buy's lowered projections follow a rocky month for consumer electronics retailers. Circuit City's filing for Chapter 11 bankruptcy protection followed its announcement that it is closing 155 stores nationwide, cutting 17 percent of its workforce and delaying new store openings through 2009 due to economic and financial turmoil coupled with renegotiated vendor terms that require the chain to pay for inventory before product is shipped to stores.
