Best Buy lowered its fiscal-year earnings forecast on Wednesday, citing fears that consumers will keep their wallets under lock and key during the holiday-shopping season.
In 42 years of retailing, we've never seen such difficult times for the consumer.
president, Best Buy
Best Buy, which saw its archrival Circuit City file for Chapter 11 bankruptcy on Tuesday, said uncertainty surrounding consumer spending has made it difficult to project revenue for the rest of fiscal 2009, which ends February 28, 2009.
Uncertainty usually scares investors, who pushed Best Buy's shares down a steep 10.85 percent to $21.29 a share in early morning trading.
Best Buy CEO Brad Anderson sized up the current situation with this statement:
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.
We're beginning to adjust our cost structure to restore earnings momentum and still gain market share.
The electronics retailing giant cut its fiscal-year revenue guidance to between $43.7 billion and $45.5 billion. It lowered its estimates for earnings per share to $2.30 to $2.90. And sales at stores opened at least a year, or comparable sales, are expected to drop between 1 percent and 8 percent for fiscal 2009.
Back in September, Best Buy was projecting fiscal year revenue of $47 billion and earnings per share of $3.25 to $3.40. It also previously predicted that comparable store sales would rise 2 percent to 3 percent for the year.
But with its September same store sales falling 1.3 percent over the same period last year and its October same store sales dropping 7.6 percent year over year, the first two months of its fiscal third quarter are expected to put a drag on the electronic giant's holiday season.
For the remaining four months in its fiscal year, Best Buy is expecting comparable sales to drop anywhere from 5 percent to a whopping 15 percent.
Best Buy President Brian Dunn put the situation in historical perspective:
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. That's why it's critical that we manage our spending, while preserving key growth initiatives.