Best Buy Co. cut its profit forecast Tuesday because of disappointing holiday sales at its music stores, and Circuit City Stores Inc. had a third-quarter loss as it cut prices and sold fewer higher-profit items.
Best Buy, the largest U.S. electronics retailer, said profit this quarter would be 5 cents lower than its previous estimate, sending its shares down 5.5%. Shares of smaller rival Circuit City fell 11%.
Declining music sales at Best Buy's mall-based stores, including Sam Goody, will hurt profit this quarter. Sales of satellite-television systems and wireless telephones slowed at Circuit City. Both retailers are cutting prices and offering interest-free financing to keep customers from fleeing to discounters such as Wal-Mart Stores Inc. and Target Corp.
"People are buying, but they are buying the bargains," said Brian Bruce of PanAgora Asset Management Investors.
Best Buy's third-quarter net income rose to $85 million, or 26 cents a share, as sales increased 16% to $5.5 billion, the company said. Circuit City had a net loss of $17.8 million, or 9 cents, compared with a profit of $27.7 million, or 10 cents, a year earlier. Sales gained 7% to $2.42 billion.