Best Buy Co. (NYSE: BBY) today gave a profit warning that was simply breathtaking."Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen. Best Buy simply can't adjust fast enough to maintain our earnings momentum for this year," said CEO Brad Anderson, vice chairman and chief executive officer of Best Buy, in a press release.
Same store sales fell a whopping 7.6% in October as consumers stayed away from the big box retailer in droves. Best Buy expects these sales to plunge between five and 15% in the four months remaining in fiscal 2009. Revenue is expected to be between $43.7 billion and $44.5 billion. Annual earnings are seen at $2.30 to $2.90. All of these figures are significantly below expectations.
Chief Operating Officer Brian Dunn said "In 42 years of retailing, we've never seen such difficult times for the consumer. People are making dramatic changes in how much they spend, and we're not immune from those forces."
Given Circuit City Stores Inc.'s (NYSE: CC) recent bankruptcy, it is hardly a shock that Best Buy is having problems as well. People struggling to pay their credit cards and mortgages are not going to be shopping for new plasma screen TVs. Some many not do any holiday shopping at all, which has got some retailers -- even those holding their own -- watching their bottom lines. Even Wal-Mart Stores Inc. (NYSE: WMT) is worried about the consumer.
Take Macy's Inc. (NYSE:M), which reported a better-than-expected quarterly loss of $44 million, or 10 cents per share. The retailer also reaffirmed its guidance. Nonetheless, Chief Executive Terry Lundgren pointed out that, "In recognition of the weak economy," Macy's slashed its capital expenditure budget "from approximately $1 billion to a range of $550 million to $600 million." Same store sales are expected to fall one to four percent in the fourth quarter.
Let's hope these retailers use these bad times to polish up their customer service. During past holiday seasons, I left my local Best Buy because the checkout lines were too long and the help too indifferent. People have enough problems these days and will be especially intolerant of being treated poorly during what is expected to be a tough holiday season for everyone.
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Reader Comments (Page 1 of 1)
11-12-2008 @ 3:52PM
gina lane said...
I just received notice two weeks ago that Best Buy had lowered my credit availability on my account by $1500! And this is an account I made regular payments on, never late. This is not the first retailer to do this to me (Amex, Macy's, Neiman Marcus...). The lower limits = lower FICO scores as my total credit availablity gets smaller and smaller. I make more money than I did when I signed up for the cards, I still make my on-time payments but the only thing that has changed is the credit market seizing up. When retailer's tighten the reigns on the very comsumers they depend on to spend money, I don't know how they think they are helping the situation.