Best Buy cuts outlook as economy slows

Best Buy Co. said Friday that its annual profit would be smaller than expected, hurt by a slowing economy as shoppers held back on purchasing TVs, digital music players and cameras.

But the nation’s largest consumer electronics retailer bet on a rebound by saying it would keep investing in new stores, including as many as 25 in China. That’s a move that could widen its lead over rival Circuit City Stores Inc. -- or hurt it if the slowdown persists.

Its shares fell $1.15, or 2.5%, to $44.62.

Best Buy said comparable-store sales rose 1.5% in December, a month when many other retailers saw declines.

But sales fell off after Christmas. Best Buy said fewer customers came into its stores in January and sales in the fourth quarter (which includes December through February) would be lower for home theater products, digital music players, cameras and video games. It said it was selling more notebook computers than expected.

Richfield, Minn.-based Best Buy expects earnings to be $3.05 to $3.10 a share for the full fiscal year, down from previous guidance of $3.10 to $3.20.

And it predicted revenue of nearly $40 billion for the year ending March 1. It said comparable-store sales for the year would rise 2.5% to 3%. Its previous expectation was 4%.

Analysts polled by Thomson Financial expected a profit of $3.16 a share on revenue of $40.2 billion.

Yet in an investor note titled “There Will Be Blood,” Credit Suisse analyst Gary Balter wrote that “if the quality and segment leader is struggling, one can only imagine how poorly others in the space are doing, with Circuit City being top of mind.”