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Best Buy 3Q profit rises; predicts slimmer margins

Tue, 12/15/2009 - 4:00am
The Associated Press

Best Buy Co. said Tuesday its third-quarter profit more than quadrupled. But shares fell 4 percent in premarket trading as it said its gross profit rate will be lower than expected in the fourth quarter and international revenue fell.

The nation's largest electronics retailer raised its earnings and revenue guidance for the year. But it says that will probably be selling more notebook computers and lower-priced TVs, which have slimmer profit margins.

Profit for the three months ended Nov. 28, 2009, rose to $227 million, or 53 cents per share, from $52 million, or 13 cents per share, last year, Last year's results included a charge related to the decline in value in its investment in U.K. retailer Carphone Warehouse.

Analysts polled by Thomson Reuters, on average, predicted a profit of 43 cents per share.

Revenue rose 5 percent to $12.02 billion, from $11.5 billion last year, ahead of the $11.98 billion analysts predicted.

That includes a 9 percent increase in domestic sales, to $8.9 billion, and a 6 percent decline in international sales, to $3.1 billion.

Figures for both years include the day after Thanksgiving, one of the biggest selling days of the year.

Sales in stores open at least fourteen months rose 1.7 percent. The metric is considered a key performance indicator for retailers because it measures growth at existing stores rather than from newly opened ones.

Sales of notebook computers, flat panel televisions, mobile phones and appliances were strong, while sales of games, movies and music were weaker.

"While a large portion of the key holiday selling season remains ahead and consumers are clearly being very conscious of what they buy and from whom they make purchases, the trends we experienced in the third quarter continue to provide encouragement about what lies ahead in the balance of the fiscal year," said Jim Muehlbauer, Best Buy's executive vice president of finance and CFO.

The company now expects yearly revenue of $49 billion to $49.5 billion, up from previous guidance of $48 billion to $49 billion. It expects profit of $2.94 to $3.09 per share, or $3.00 to $3.15 per share excluding one-time items.

It previously forecast earnings of $2.70 to $3 per share for the year.

Best Buy has gained market share since its biggest direct competitor, Circuit City, closed last year. But it faces tight competition from lower-priced stores such as Walmart and Target and online retailers such as Amazon.

The Minneapolis company expanded into new product categories during the quarter, including fitness and DJ equipment.

Shares fell $1.94, or 4.3 percent, to $43.43 during premarket trading.

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