Best Buy, Circuit City Profits Up
Tuesday April 2, 12:14 pm Eastern Time
Reuters
By Ellis Mnyandu
NEW YORK (Reuters) - Best Buy Co. Inc. (BBY - news) and Circuit City Stores Group (CC - news) on Tuesday reported higher quarterly profits on strong sales of DVD players, camcorders and big-screen TVs, but both consumer electronics retailers warned that first-quarter results may miss Wall Street forecasts.
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Minneapolis-based Best Buy, the U.S. market leader, said fiscal fourth-quarter profits jumped 84 percent in the fourth quarter ended on March 2 due to fewer markdowns and robust sales of higher-margin digital products.
But the company, which has been grabbing market share from second-ranked rival Circuit City, forecast first-quarter earnings of 30 cents to 32 cents a share, below the Thomson Financial/First Call consensus estimate of 34 cents.
Circuit City said profits rose 51 percent in the fourth quarter ended on Feb. 28 on strong demand for newer home entertainment technologies, sharper marketing and a focus on customer service.
For the current quarter, the chain of more than 600 stores forecast a loss due to store remodeling costs and advertising expenses. Analysts' estimates had ranged from break-even results to earnings of 8 cents a share, with a mean estimate of a 3-cent profit.
Shares of Best Buy, which operates nearly 1,900 stores under its own name as well as Future Shop, Sam Goody, Suncoast and other brands, were down $3.07, or 3.9 percent, at $75.41 in late morning New York Stock Exchange trade. Circuit City stock rose 48 cents, or 2.7 percent, to $18.60.
BEST BUY OUTLOOK CONSERVATIVE
SunTrust Robinson Humphrey analyst David Schick said he views Best Buy's near-term projections as conservative as the company remains poised to expand its store base, which would help earnings.
``We believe it's certainly possible that business could be better than the numbers they (Best Buy) are hinting at,'' Schick said. ``We understand they are taking a slightly conservative tone in the near term.''
Best Buy said fourth-quarter net income rose to $350 million, or $1.62 a share, from $190 million, or 89 cents a share, a year earlier. The results were 1 cent higher than the First Call consensus estimate and within the company's earlier forecast.
Best Buy had said in March its fourth-quarter sales rose 28 percent to $6.98 billion, while sales at Best Buy stores open at least 14 months rose 4.5 percent.
Circuit City reported net income of $152.7 million, or 73 cents a share, for the fourth quarter ended on Feb. 28, compared with $101.2 million, or 49 cents a share, a year earlier. The 2001 fourth-quarter results were in line with analysts' estimates and a previous forecast from the company.
The results include a retained equity interest in auto retailer CarMax Group (KMX - news), which itself posted a quarterly profit of 17 cents a share.
Circuit City said total sales in the latest quarter rose 7 percent to $3.39 billion from $3.18 billion. Sales at stores open at least a year rose 6 percent.
The company is in the midst of revamping about 300 stores in bid to regain market share lost to mainly to Best Buy, a step some analysts have said may disrupt its business.
SunTrust Robinson Humphrey analyst Schick said he sees Circuit City stock as undervalued and that the store revamping program may help the company to stem further market share declines.
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[Harry: Outlook being backed up by more current chain store results.]
Tuesday April 2, 1:04 pm Eastern Time
Reuters
Retail Sales at Chain Stores Fell
By Pedro Nicolaci da Costa
NEW YORK (Reuters) - Retail sales at U.S. chain stores fell last week as a boost expected from Easter-related purchases failed to materialize, a sign that a return to strong economic growth could be slow in coming, two reports suggested on Tuesday.
Analysts say that strong consumer spending -- which accounts for two-thirds of U.S. economic activity -- during the downturn could mean there is little pent-up demand to fuel the recovery.
U.S. chain store sales fell 0.6 percent during the week ended March 30 after a 0.6 percent drop in the prior week, the Bank of Tokyo-Mitsubishi and UBS Warburg reported in their Weekly Chain Store Sales Snapshot.
Separately, Instinet's Redbook Retail Sales Average slipped 1.1 percent in the four weeks to March 30 compared with the same period last month.
``It is an indicator of a slow recovery to come,'' said Kurt Barnard, president of Barnard's Retail Consulting Group. He added that the sort of euphoric growth seen in the late 1990s is unlikely to make a comeback any time soon.
``The consumer today is in no mood to go on a spending spree,'' Barnard said. ``They'll buy what they need, but even then, they will look for the lowest possible price.''
Bargain-hunting has benefited discount retailers like Wal-Mart Stores (WMT - news) for some time now. Department stores, on the other hand, have struggled as consumers worried about job security and the prospect of an economic turnaround.
But even for discounters, the current environment is unlikely to prompt a huge surge in spending in the near future, analysts said.
Retail stocks took a hit on Monday after analysts at two major Wall Street investment banks downgraded their stock recommendations for Wal-Mart and other retailers, warning of potential difficulties ahead for the retail sector.
``There is very little pent-up demand in the consumer and household sector,'' said Oscar Gonzales, economist at John Hancock Financial Services in Boston.
``Until you really get more of a rebound in the investment portion of the economy and a healthier outlook on corporate profits, you're really going to be bouncing up and down,'' Gonzales said.
WEAK EASTER SALES ALL AROUND
Easter sales disappointed discounters and department stores alike.
Federated Department Stores Inc. (FD - news), parent of Macy's and Bloomingdale's, on Monday lowered its same-store sales forecast for March, saying sales were weaker than expected in the last week of the month.
Other major retailers like Wal-Mart, Target Corp. (TGT - news) and Sears, Roebuck and Co. (S - news) reported lackluster sales in the week.
Wal-Mart, the world's largest retailer, also said in a recorded message that sales in the week ended Friday fell short of its expectations. The Bentonville, Arkansas-based retailer cited winter storms and unseasonable weather as the source of the weakness.
The BTM/UBSW Weekly Chain Store Sales Snapshot is compiled from seven major discount, department and chain stores across the country that report their weekly results. They include J.C. Penney Co. Inc. (JCP - news), Sears, Target, Kmart (KM - news), Wal-Mart, Federated and May Department Stores (MAY - news).
The Redbook Retail Sales Average, released weekly by Instinet Research, is a sales-weighted average of annual growth in same-store sales at discount, department and chain stores. |
