Best Buy cuts '08 EPS outlook, shares fall

MINNEAPOLIS Best Buy cut its fiscal 2008 earnings outlook, citing lower-than-expected revenue growth in fiscal January coupled with its near-term outlook. The company said it now expects its fiscal 2008 earnings per diluted share to be $3.05 to $3.10 for the fiscal year which concludes on March 1. The company's previous guidance called for earnings per share to be between $3.10 and $3.10. The company reported EPS of $2.79 for the prior year.

“Our December revenue results were in line with our expectations. Soft domestic customer traffic in January, coupled with our near-term outlook, now indicate that our fourth-quarter revenue will fall short of our planned targets,” said Brad Anderson, vice chairman and ceo of Best Buy.

The company said it now expects comparable-store sales to decline modestly for the fiscal fourth quarter. As a result, the company is projecting nearly $40 billion in revenue for fiscal 2008, including an annual comparable store sales gain of 2.5% to 3%, compared with previous guidance of approximately 4%.

Best Buy reported that it expects to see lower fourth quarter revenue in the home theater, MP3 devices, digital imaging and video gaming categories, compared with its prior expectations. These volume reductions are expected to be partially offset by higher-than-expected volumes from notebook computers, which are benefiting from an expanded assortment and continued customer interest in mobile computing.

“The macro-economic environment grew more challenging after the holidays,” said Jim Muehlbauer, enterprise interim cfo. “Our post-holiday results are not going to be what we originally expected. Yet our strategic results are favorable; our most recent data shows that customer satisfaction improved, and we built market share in key categories such as home theater, computing and gaming.” 

Shares of Best Buy fell this morning to $44 from its previous close of $45, following the announcement of the lowered earnings forecast.