updated 4/2/2008 3:58:45 PM ET 2008-04-02T19:58:45

Best Buy ended its year with a 3 percent drop in its fourth-quarter earnings, showing that the nation’s largest consumer electronics retailer isn’t immune to a weaker economy.

Its profit of $737 million for the last three months of its fiscal year was still better than analysts expected. So was its guidance for the fiscal year ahead. But that guidance assumes a weak first half of the year and a strong second half.

“The company over the years has had a number of times in which it’s faced a difficult economic climate,” Vice Chairman and CEO Brad Anderson said on a conference call. “... And this is one of those times, where the environment is very challenging.”

Best Buy said sales were strong through the holidays but fell off in January. For the quarter that ended March 1, sales fell 0.9 percent at U.S. stores open at least 14 months.

Best Buy said it expects growth in the television business to slow in the year ahead. Comparable-store sales of consumer electronics, which include TVs, fell 4.6 percent for the quarter.

Interim Chief Financial Officer Jim Muehlbauer said Best Buy is planning for a “soft consumer environment in the near-term,” and that it’s counting on second-half growth to offset “modest declines” in the first half.

That second-half growth will come from a combination of an improving economy, and internal actions such as expanding its Best Buy Mobile phone sales to the majority of its more than 800 U.S. stores from 181 stores now over the next 18 months.

And it’s not clear how much help it will get from the economic stimulus checks going out over the summer. A survey by the Consumer Electronics Association in February found that consumers expect to spend just about 4 percent of their stimulus checks on electronics.

Jefferies & Co. analyst Dan Binder said several retailers are counting on a stronger second half.

“The million-dollar question is whether or not that actually happens,” he said.

He’s not so sure it will. Economic indicators such as surveys of lenders and the housing market suggest the environment for retailers will keep getting worse over the next nine months, he said.

“I think that’s going to lead to another round of expectations being missed,” he said. “While Best Buy is a great company in a great sector of retail, they’re not immune to macroeconomic forces.”

Richfield, Minn.-based Best Buy said it earned $1.71 per share for the quarter, versus $763 million, or $1.55 per share, during the same period last year. (Even though profits fell, earnings per share rose because there were fewer shares outstanding after a major share repurchase last year.) Analysts polled by Thomson Financial expected a smaller $1.65 per share profit.

Revenue rose 4 percent to $13.42 billion from $12.9 billion a year ago. Analysts expected revenue of $13.19 billion.

For the full year, Best Buy earned $1.41 billion, or $3.12 per share, up from $1.38 billion, or $2.79 per share, during the prior year. Revenue rose to $40 billion from $35.9 billion a year ago.

For fiscal 2009, the company expects a profit of $3.25 to $3.40 per share on revenue of $43 billion to $44 billion. Analysts had expected a profit of $3.31 per share. Best Buy said it expects comparable store sales to grow 1 percent to 3 percent for the year, with the fastest growth at its international stores.

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