Best Buy earnings
Nam Y Huh  /  AP
Best Buy said its second-quarter results fell below expectations as sales at established stores declined.
updated 9/15/2009 9:24:30 AM ET 2009-09-15T13:24:30

Best Buy Co., the largest U.S. electronics retailer, said Tuesday second-quarter results fell below expectations as sales at established stores fell.

Still, the retailer raised its guidance for the year based on stabilizing customer traffic.

Profit for the three months ended Aug. 29 fell 22 percent to $158 million, or 37 cents per share, from $202 million, or 48 cents per share last year, hurt by higher expenses and the stronger dollar. Analysts polled by Thomson Reuters, on average, predicted a profit of 42 cents per share.

Revenue rose 12 percent to $11 billion, boosted by gains from adding Best Buy Europe's revenue and the addition of 170 net new stores over the past 12 months. That was offset by a 3.9 percent decline of sales at established stores and the drag of the stronger dollar, which hurts international revenue because sales translate back into fewer dollars.

Analysts had expected revenue of $10.79 billion.

Domestically, traffic rose "slightly," the Richfield, Minn.-based company said, but that was offset by a slight decrease in average ticket.

Top sellers were notebook computers, phones and flat-panel TVs, offset by weakness in gaming, digital cameras, music and movies.

The company has gained market share because of the closing of Circuit City stores but has been hurt by the cutback in consumer spending amid the recession. Best Buy said it added 2.7 percentage points of market share in the quarter.

The company said during the quarter profit was pressured by new initiatives to drive traffic into the stores "intended to capitalize on competitive opportunities." Its gross profit rate was also hurt by the launch of the new iPhone.

The company said that due to revenue growth that "modestly" exceeded expectations for the first half of the year, along with indications traffic is stabilizing, it is raising its guidance for the year. It now expects earnings of $2.70 to $3 per share for the year, up from between $2.50 and $2.90. Analysts predict $2.87.

It expects revenue of $48 billion to $49 billion, from previous guidance of $46.5 billion to $48.5 billion, while analysts expect revenue of $47.8 billion. It predicts sales at established stores will be flat to down 2 percent.

Best Buy said the guidance is balanced by the view that "overall consumer spending will remain under pressure given the expected continued softness in the economy and by the fact that most of our earnings are still ahead of us in the holiday selling season."

Best Buy shares fell 22 cents to $40.19 in premarket trading.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Best Buy's 2Q Numbers

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