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Best Buy posts better-than-expected profit

Best Buy Co. Inc. said its fourth-quarter sales grew 10 percent and adjusted profit was better than expected — surprisingly good news.
/ Source: The Associated Press

Best Buy Co. Inc. said its fourth-quarter sales grew 10 percent and adjusted profit was better than expected, surprisingly good news that sent shares of the world’s largest consumer electronics retailer climbing Thursday.

“We prepared for reduced consumer spending, and we were pleased when the quarter finished stronger than it began,” retiring Chief Executive Brad Anderson said in a statement.

For the three months ending Feb. 28, Best Buy’s profit fell 23 percent to $570 million, or $1.35 per share, as restructuring charges dragged down results. That compares to $737 million, or $1.71 per share, a year earlier.

Excluding those one-time charges that amounted to 26 cents per share, Best Buy earned $682 million, or $1.61 per share — well ahead of profit forecasts.

Analysts polled by Thomson Reuters, whose estimates generally exclude one-time items, predicted earnings of $1.40 per share on revenue of $14.8 billion for the quarter

Meanwhile, the Richfield, Minn.-based company said its fourth-quarter revenue was $14.72 billion from $13.42 billion. The boost came from strong sales of laptop computers and cell phones, along with help from Best Buy Europe and 213 new store openings within the past year.

The retailer also gave a better-than-expected outlook for the full year.

The performance was a welcome one for Richfield, Minn.-based Best Buy after a series of changes in the industry and internally. The company is poised to grab market share following Circuit City Stores Inc.’s liquidation but has recently struggled with declining sales — which prompted layoffs.

Best Buy is also preparing for a changing of the guard, with Chief Operating Officer Brian Dunn set to take over for Anderson this summer.

The revenue results were somewhat tempered by a same-store sales decline of 4.9 percent, which Best Buy blamed on reduced traffic. Same-store sales, or sales at stores open at least a year, are a key indicator of performance since they measure growth at existing stores rather than newly opened ones. But the figures were still ahead of forecasts. Best Buy said customer traffic fell, but the average amount shoppers were spending climbed during the period.

Best Buy now expects a 2010 profit of between $2.50 and $2.90 per share, on revenue of $46.5 billion to $48.5 billion. That assumes that about 65 new stores open during the fiscal year, with same-store sales flat to down 5 percent.

Analysts expect earnings of $2.47 per share on sales of $48.05 billion.

Citi analyst Kate McShane said the guidance was better than expected, but was surprised the company didn’t forecast greater comparable sales gains as shoppers from Circuit City make their way to Best Buy stores.

For the full fiscal year, earnings dropped 29 percent to $1 billion, or $2.39 per share, from $1.41 billion, or $3.12 per share, in the previous year. Adjusted profit was $2.88 per share. Sales rose 13 percent to $45.02 billion from $40.02 billion.