Best Buy 2Q profit slides 19 percent

[September 17, 2008]  CHICAGO (AP) -- Best Buy Co. said Tuesday that its second-quarter profit slid 19 percent as it spent money to boost cell phone sales by completing the rollout of its Best Buy Mobile concept to nearly 1,000 North American stores.

Revenue rose, however, as consumers bought more flat-panel TVs, laptops and cell phones, ahead of forecasts.

The nation's largest consumer electronics retailer earned $202 million, or 48 cents per share, for the three months ending Aug. 30. That's down from $250 million, or 55 cents per share, during the same period last year. Revenue rose 12 percent to $9.8 billion.

The profit came in below Wall Street forecasts, sending the stock down, despite results that beat projections for revenue and same-store sales.

"Although we're never satisfied with earnings below expectations in any quarter, we think it does not reflect the long term health of our company or the soundness of our strategy," said Brian Dunn, the company's president and chief operating office.

Analysts surveyed by Thomson Reuters had expected the company to earn 57 cents per share on revenue of $9.67 billion.

Despite the worse-than-expected profit, the company eked out a 4.2 percent increase in same-store sales, a retail industry metric that measures sales at existing locations rather than newly opened ones. In the U.S., comparable-store sales rose 5.3 percent.

RBC Capital Markets analyst Scot Ciccarelli told investors in a research note that the Richfield, Minn.-based company's same-store sales were "very solid in (a) tough environment."

Analysts said the slowing U.S. economy will likely challenge Best Buy even more in the second half -- a time that includes the important holiday shopping period on which retailers depend.

"These results highlight the challenge of delivering consistent profit performance while juggling a broad array of growth initiatives," Goldman Sachs analyst Matthew Fassler told investors in a research note Tuesday. "... (Best Buy) has often thrived most with its back to the wall, when the reality of tough markets and expense misses intensify discipline."

The company reaffirmed its earnings per share guidance for the fiscal year on Tuesday, saying it expects a profit of $3.25 to $3.40 per share on revenue of about $47 billion. Wall Street analysts expect Best Buy to earn $3.28 on revenue of $44.7 billion.

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The company said it expected same-store sales in 2009 to be on the higher end of its previously predicted range of 1 percent to 3 percent growth. Second-half same-store sales are expected to be lower than first-half growth of 4 percent.

The company also acknowledged it would have to rein in spending in order to meet full-year expectations.

Best Buy shares fell $1.81, or 4.1 percent, to $41.89 in afternoon trading Tuesday.

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On the Net:

http://www.bestbuyinc.com/

[Associated Press; By ASHLEY M. HEHER]

AP Business Writer Vinnee Tong in New York contributed to this report.

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