Weak TV demand seen hurting Best Buy results

By @ibtimes on

Best Buy Co Inc is poised to report its third straight quarter of same-store sales declines on weak demand for televisions and entertainment software in the all-important holiday season.

The top U.S. consumer electronics chain by sales, whose decision to focus on promoting pricier televisions backfired, has consistently lost bargain-hungry shoppers to online retailer Amazon.com Inc and mass merchants such as Target Corp and Wal-Mart Stores Inc.

Best Buy advertised cheaper TVs later in the season, but its December same-store sales still fell 4 percent.

Wedbush analyst Michael Pachter is looking for a 2.2 percent same-store sales decline in the fourth quarter, including a 3 percent decline at its U.S. stores open at least 14 months.

In the United States, falling same-store sales from consumer electronics and entertainment software from market share losses to lower-priced online and big box retailers should offset growth for home office (from mobile phones and computing), appliances, and services, Pachter said.

He expects Europe and China to help the retailer's sales outside the United States.

Best Buy, seen as a bellwether in consumer electronics, has been hurt by U.S. shoppers showing little interest in newer technologies, like 3D and Internet-based televisions.

We understand Best Buy's near-term issues related to less robust product cycles, but we think the fears regarding secular issues are off base, Janney Capital Markets analyst David Strasser said in a note.

The competitive landscape is changing, but Best Buy is adjusting to these changes via investments online, new strategies to support connectivity, and expansion in growth categories such as wireless/tablets, Strasser said.

In February, Best Buy announced plans to close its branded stores in China and Turkey as part of an effort to generate savings of up to $70 million by fiscal 2013.

The retailer, which also plans to focus on the profitable growth of its Best Buy Mobile business in the United States, said it will open more smaller format stores this year rather than the costlier larger ones. At the time, it also backed its fiscal 2011 diluted earnings forecast of $3.20 to $3.40 a share, excluding restructuring charges.

(Editing by Gary Hill)

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