Best Buy, Circuit City Profits Surge on Sales

Best Buy Co. and Circuit City Group on Tuesday said fiscal fourth-quarter profits surged on strong sales of DVD players, camcorders and big-screen TVs, but both consumer electronics retailers warned that results in the current quarter may be weaker than expected.

Best Buy shares dropped about 6% after the U.S. market leader said earnings for the first quarter ending in May will probably fall at or below the low end of Wall Street expectations because of weak sales.

But shares of Circuit City, which ranks second to Best Buy, rose more than 5% even though the company said it expects to report a loss at its stores instead of the profit that some analysts were expecting for the quarter.

Analysts said the Richmond, Va.-based retailer may further reverse its market share loss to Best Buy as it revamps about half of its more than 600 stores in a bid to sell more profitable digital products.

Best Buy said net income jumped 84% to $350 million, or $1.62 a share, in the fourth quarter ended March 2 from $190 million, or 89 cents, a year earlier. The results were 1 cent higher than the Thomson Financial/First Call consensus estimate and within the company’s earlier forecast.

The Eden Prairie, Minn.-based company said it benefited from fewer markdowns and robust sales of higher-margin digital products, particularly in the December shopping season. Best Buy had said in March its fourth-quarter sales rose 28% to $6.98 billion.

Best Buy closed off $4.47, or 5.62%, at $75.01 on the New York Stock Exchange, after earlier trading as low as $74.25.

On the year Best Buy is up just over 1%, while Circuit City is down nearly 36%.

Circuit City reported net income of $152.7 million, or 73 cents a share, for the fourth quarter ended Feb. 28, up 51% from $101.2 million, or 49 cents, a year earlier and in line with analysts’ estimates and a previous forecast from the company.

Results include a retained equity interest in auto retailer CarMax Group, which posted a profit of 17 cents a share.

Circuit City said sales in the quarter rose 7% to $3.39 billion.

But for the current quarter, the company said it expects to post a loss because of remodeling costs and advertising expenses. It said it expects “small profits” in the second and third quarters.

Circuit City climbed $1.03 to $19.15 on the NYSE. They earlier rose as high as $19.25.