Best Buy Profit Falls as Sales of High-Margin Items Falter

Best Buy, the nation's largest consumer electronics retailer, lowered its 2008 profit estimate on Tuesday, blaming a softening economy that's steering shoppers away from high-margin items like flat-screen TVs.

Shares of Best Buy, whose rivals include Circuit City Stores , Tweeter Home Entertainment Group as well as Wal-Mart, slipped in early trade after the company also forecast a full year profit that also fell short of Wall Street analysts views.

"Pricing has been fairly stable,” Mitchell Kaiser, analyst at Piper Jaffray, told CNBC’s “Squawk Box” Tuesday. “Big ticket items aren’t selling. We think it’s unit demand at this point more than anything else.”

Best Buy reported net income of $192 million, or 39 cents a share for its fiscal first quarter that ended June 2, from $234 million, or 47 cents a share, a year earlier.

Analysts, on average, had been expecting it to earn 50 cents per share, according to Reuters Estimates.

Revenue rose to $7.93 billion, beating analyst targets of $7.83 billion. One year ago, the Minneapolis-based company company posted revenue of $6.96 billion.

Looking ahead, the company said it expects consumer spending to be difficult to predict this year, with flat-panel televisions and portable computers staying strong. It sees sales in lower-margin categories accelerating.

Best Buy said it sees earnings per share for the year at $2.95 to $3.15, short of analysts average view of $3.16, according to Reuters Estimates.

Shares of Best Buy fell 2.4 percent on Tuesday after the report. The stock closed on Monday at $48.01 on the New York Stock Exchange. The stock is down about 2 percent for the year, and has generally hovered between $45 and $50 during that time.

Over the same period the S&P 500 has risen about 8 percent.

Contact U.S. News


    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video

  • Bruce Ratner, Barclays Center majority owner, shares his hopes of holding the 2016 Democratic convention in Brooklyn, New York. You have an economic impact that far exceeds any inconvenience that may happen, says Ratner, discussing the benefits of hosting the event.

  • CNBC's Steve Liesman talks to Kansas City Fed President Esther George about market complacency and the future of interest rates.

  • Douglas Lebda, LendingTree CEO, and Roger Cregg, AV Homes CEO, share their take on the housing industry, mortgage lending and home construction. Jobs have the biggest impact on the industry, says Cregg.