Vanishing Consumer Hurts Best Buy
"In 42 years of retailing, we’ve never seen such difficult times for the consumer," says Best Buy President
By: Maureen O'Gara
Nov. 12, 2008 02:30 PM
The toxic virus of soft consumer spending has hit Best Buy forcing it to axe its earnings guidance for the year and take it from $3.25-$3.40 a share to somewhere between $2.30 and $2.90. The retailer’s eroding outlook will of course boomerang back on its suppliers as it tries to adjust inventory, this after rival Circuit City just filed for bankruptcy protection owing hundreds of millions to folks like HP, Samsung, Sony and Toshiba.
Best Buy president Brian Dunn issued a statement saying, "In 42 years of retailing, we've never seen such difficult times for the consumer. People are making dramatic changes in how much they spend, and we're not immune from those forces."
CEO Brad Anderson called the consumer pullback "seismic" and said Best Buy "simply can't adjust fast enough to maintain our earnings momentum."
The company, which ironically thinks it's gained market share, said the bottom started caving in the middle of September. US same-store sales that month were down 2.4%, international was up 3.6%. In October US same-store sales dropped 7.8% and international sales dropped 6.4%.
It's figuring that sales between now and the end of February could be down anywhere from 5% to 15% and a stronger dollar will take a nasty toll on the international P&L, which means that the company's sales for the year could be off 1%-8%.
Best Buy gets about 30% of its revenues from abroad these days.
It had been projecting a 2%-3% sales gain this year. Now it says it'll do $43.7 billion-$45.5 billion.
The company's third-quarter results are due December 16 in the midst of what is expected to be the worst holiday sales in decades.
The same-store measurement, by the way, means stores that have been open 12-14 months.
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