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Best Buy posts lower profit, cuts forecast for '08

June 20, 2007|From the Associated Press

MINNEAPOLIS — Best Buy Co., the nation's largest consumer electronics retailer, lowered its 2008 profit estimate Tuesday, blaming a softening economy that's steering shoppers away from high-margin items such as flat-screen TVs.

The company also reported that first-quarter earnings fell 18%, partly in response to the inclusion of the company's new lower-margin business in China. Shares slid $2.83 to $45.18.

Chief Executive Brad Anderson said weakness in the overall economy was a major factor in the company's sales skewing away from high-margin, big-ticket products.

"I think the reason those categories were soft had to do with the macro economy," he said. "Some of our consumers felt the squeeze on their discretionary income. We felt that pretty directly and pretty immediately."

He said he expected improvement in the economy -- and Best Buy's profit -- by the end of the calendar year, however.

Still, the Minneapolis-based company cut its fiscal 2008 profit outlook to $2.95 to $3.15 a share, down from its earlier projection of $3.10 to $3.25 a share. The company retained its annual revenue guidance of about $39 billion.

Profit for the fiscal quarter ended June 2 dropped to $192 million, or 39 cents a share, from $234 million, or 47 cents, a year earlier. Revenue rose 14% to $7.93 billion. The revenue increase included the addition of 230 new stores, including 131 through acquisitions.

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