Expanded discussion from newswire...
Wednesday January 5, 3:09 pm Eastern Time
FOCUS-Best Buy posts strong sales, boosts outlook
(Adds CEO quotes grafs 4 and 11, analyst comment graf 13, edits throughout)
CHICAGO, Jan 5 (Reuters) - Best Buy Co. Inc., the largest U.S. consumer electronics retailer, on Wednesday raised its quarterly earnings forecast after reporting sales that topped expectations for December, the key holiday shopping month.
Best Buy (NYSE:BBY - news) said sales at stores open more than a year rose 9.8 percent in December, about double what it had expected. Total sales jumped 23 percent to $2.27 billion, with sales of new digital products accounting for more than 10 percent of that.
The Minneapolis-based retailer said it was raising its fourth-quarter earnings forecast to 72 cents a share from 68 cents, given at the end of the third quarter.
``I can't stress enough how excited we are about the move to digital products,' Richard Schulze, Best Buy chairman and chief executive, said in a conference call with analysts and reporters. Digital products, such as digital wireless phones and DVD players, have higher profit margins and are often linked to related products and services.
December is the first month of Best Buy's fiscal fourth quarter, which runs through February, but it accounts for roughly one-half of its fourth-quarter revenues.
The retailer said it expects to exceed its 25 percent year-over-year earnings growth goal in fiscal 2001, thanks to the move to digital products and financial benefits from its new alliance with software giant Microsoft Corp. (NasdaqNM:MSFT - news).
Best Buy shares were volatile on Wednesday, ranging between $52.50 and $58.375. In afternoon trading Best Buy was off 75 cents at $56.56 on the New York Stock Exchange.
The alliance with Microsoft, announced in December, is a broad Internet access and marketing deal. Best Buy expects to finalize the deal in the very near future and said it will give additional fiscal 2001 earnings guidance at the end of the fourth quarter.
The company said profits from the alliance should more than offset the expected cost of revamping its Web site in the next fiscal year.
Also in December, Best Buy said it had made a $10 million equity investment in etown.com, a consumer electronics information and shopping Web site.
``The company believes strongly that we need to move away from being the traditional seller of product only and we need to get dialed into the loop that represents the true integration of content with product and service,' Schulze said.
Analysts agreed that it is important that Best Buy lay the foundation for offering profitable service arrangements, and that the shift to digital products as well as alliances are part of it.
``They sell them (consumers) hardware and at the same time sign them up,' said Dean Ramos, an analyst for George K. Baum. ``It translates into a participation in that income stream.' |
