Best Buy Co., Inc. (BBY), a specialty retailer of consumer electronics, is scheduled to report fourth-quarter results for the fiscal year ending February 2009, before the market opens on Thursday. While the economic crisis is expected to have an impact on the company's bottom line, the demise of competitor Circuit City Stores Inc. (CC, CCTYQ.PK) is anticipated to play a positive role in its earnings.

The ongoing economic crisis has hurt sellers of discretionary products deeply, as it has forced consumers to sharply cut back on their spending. A shaky job market and a prolonged housing slump have added to the gloom. In addition, consumer electronics retailers are facing stiff competition from discount retailers such as Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT). As a result, Richfield, Minnesota-based Best Buy and its peers are experiencing severe pressure on top-line as well as margins.

In December 2008, the company announced a drop in third-quarter profit, hurt by an investment impairment charge, despite a 16% revenue growth. Net earnings for the quarter declined to $52 million or $0.13 per share from $228 million or $0.53 per share in the prior-year quarter. Excluding charge, adjusted earnings per share fell 34% to $0.35 from $53 in the year-ago quarter. Revenue increased to $11.50 billion from $9.93 billion in the same quarter last year.

While announcing the third-quarter results, the company also announced a voluntary separation package in order to reduce its corporate expenses, and said it may be forced to lay-off employees based on the outcome of the package. But it was reported in January that only 500 of the 4000 corporate employees accepted the package and the company might eliminate an undisclosed number of personnel.

Same-store sales, a key measure of health for retailers, were not encouraging for Best Buy in December 2008. The company's comparable store sales for the month dropped 6.5% reflecting decline in domestic as well as international sales, although a 4% increase was seen in revenues for the month. Further, the company narrowed its fiscal 2009 adjusted earnings as well as comparable store sales forecast to a range of $2.50 to $2.70 from $2.30 to $2.90 per share. The company said the guidance assumes a comparable-store sales decline of 2% to 3% for fiscal 2009, compared to previous forecast of comparable store sales decline of 1% to 5%.

During the fourth quarter, Best Buy effected a key management change. On January 21, the company announced the promotion of president and chief operating officer Brian Dunn as chief executive officer, as part of the company's succession plan. Dunn's appointment will come into effect on June 24, when current CEO and vice chairman Bradbury Anderson retires from the lead position.

Among peers, Circuit City, which had been liquidating its assets, closed its last 567 stores this month. The company, which could not find a buyer or an investor, said in January that it would seek Bankruptcy Court approval to begin the process to liquidate its assets. Faced with a deteriorating cash position and stringent terms from vendors, the company had filed for Chapter 11 bankruptcy protection, ahead of holiday season in November.

Many investors feel that when results are announced later in the day, Circuit City's disappearance from the scene may have a positive impact on Best Buy's report card, but a weak consumer spending sentiment could still be a pull-back factor. On average, 22 analysts polled by Thomson Reuters expect quarterly earnings of $1.40 per share. Revenue is estimated to be $14.82 billion. Full year earnings are estimated to be $2.65 per share on revenues of $45.13 billion. Analysts' estimates typically exclude special items.

Credit Suisse said in a client note on March 20 that it believes the benefits from Circuit City's demise will offset macro and product weakness, leading to better than expected earnings. The firm also feels that the near term has been strong with first few weeks of March.

Further, dwelling on the management transition to Brian Dunn as chief executive, the brokerage said, .while he does not take his new position until June, we are likely to get direction from him. There is a stock risk that he discusses moving closer to price parity with Wal-Mart and Amazon, the current competitors now with Circuit City out of the picture. He may also take a more conservative view of the outlook, a stance we often see when a new leader takes charge. Both may send the stock lower on earnings day. The firm raised its price target on the company to $40 from $36.

Best Buy is also expected to provide its initial earnings guidance for fiscal 2010 on Thursday. Analysts are looking for earnings of $2.47 per share on revenues of $48.05 billion.

BBY closed Wednesday's regular trade at $33.46, up $0.22 or 0.66%, on 12.37 million shares. For the past year, the stock fluctuated in the range of $16.42-$48.03.

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