CHICAGO (AP) -- Best Buy Co. Inc. rattled investors Wednesday, warning that an already grim holiday shopping season that's expected to be the worst in decades might be getting worse.
Days after its rival Circuit City filed for bankruptcy protection, the nation's largest consumer electronics chain dramatically cut its fiscal 2009 earnings outlook and said it was being hammered by the worst retail environment the 42-year-old company has yet to endure.
"Rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen," Chief Executive Brad Anderson said in a statement. "Best Buy simply can't adjust fast enough to maintain our earnings momentum for this year."
But Best Buy's misfortunes may spell opportunity for deal-seeking shoppers, especially during the traditional Black Friday shopping extravaganza on the day after Thanksgiving.
Morningstar analyst Brady Lemos said he expects Best Buy to offer deep discounts on products to try to drive sales and keep customers coming into stores.
"It's big news for consumers," he said. "I think they'll want to sell as much as possible."
The Richfield, Minn.-based chain said it now expects earnings per share between $2.30 and $2.90 for the fiscal year ending in February, down from a prior estimate of $3.25 to $3.40 per share.
The retailer forecast revenue between $43.7 billion and $45.4 billion, as well as a 1 percent decline in same-store sales, or sales at stores open at least 14 months, as shoppers scale back on spending because of a tight credit market.
Analysts expect earnings of $3.02 per share and sales of $46.23 billion for fiscal 2009, according to a Thomson Reuters survey. They said Wednesday that they didn't foresee the magnitude of the guidance cut announced Wednesday.
Best Buy shares fell $1.62, or 6.8 percent, to $22.26 in afternoon trading.
"The fact that they had to lower numbers should not have been a huge surprise, but the range the company provided was," Jefferies & Co. analyst Daniel Binder told investors in a research note.
Meanwhile, Standard & Poor's cut its rating on the retailer after the announcement to "Buy" from "Strong Buy."
On Monday, Best Buy's largest rival, Circuit City Stores Inc., filed for Chapter 11 bankruptcy protection and said it was cutting more jobs than the thousands announced last week, citing eroding vendor confidence, decreased liquidity and the global economic crisis.
Earlier this week investors said Best Buy was poised to benefit from the collapse of its competitor and would be able to attract customers scared by the bankruptcy filing while reaping bigger sales in the coming months.
Now, experts said, there's less chance for a short-term boost, even though the chain is still likely to pick up market share.
"I think the overall market has gotten a lot worse very quickly, so they haven't had too much time to benefit from Circuit City's struggles," Lemos said.
Best Buy's same-store sales, a closely watched retail industry metric, fell 7.6 percent in October. And same-store sales between November and February may plummet by 5 percent to 15 percent, the company said. That means annual same-store sales will slide between 1 percent to 8 percent.
Adding to the company's woes is its increased international exposure, said Goldman Sachs analyst Matthew Fassler. International operations made up about 30 percent of revenue for the third quarter compared with 17 percent in the same quarter a year ago.
"The rapid appreciation in the dollar versus the euro, British pound, and Canadian dollar is pressuring international earnings," Fassler wrote in a client note, adding that sales in Canada are declining as well.
Best Buy is scheduled to post third-quarter results Dec. 16.
Days after its rival Circuit City filed for bankruptcy protection, the nation's largest consumer electronics chain dramatically cut its fiscal 2009 earnings outlook and said it was being hammered by the worst retail environment the 42-year-old company has yet to endure.
"Rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen," Chief Executive Brad Anderson said in a statement. "Best Buy simply can't adjust fast enough to maintain our earnings momentum for this year."
But Best Buy's misfortunes may spell opportunity for deal-seeking shoppers, especially during the traditional Black Friday shopping extravaganza on the day after Thanksgiving.
Morningstar analyst Brady Lemos said he expects Best Buy to offer deep discounts on products to try to drive sales and keep customers coming into stores.
"It's big news for consumers," he said. "I think they'll want to sell as much as possible."
The Richfield, Minn.-based chain said it now expects earnings per share between $2.30 and $2.90 for the fiscal year ending in February, down from a prior estimate of $3.25 to $3.40 per share.
The retailer forecast revenue between $43.7 billion and $45.4 billion, as well as a 1 percent decline in same-store sales, or sales at stores open at least 14 months, as shoppers scale back on spending because of a tight credit market.
Analysts expect earnings of $3.02 per share and sales of $46.23 billion for fiscal 2009, according to a Thomson Reuters survey. They said Wednesday that they didn't foresee the magnitude of the guidance cut announced Wednesday.
Best Buy shares fell $1.62, or 6.8 percent, to $22.26 in afternoon trading.
"The fact that they had to lower numbers should not have been a huge surprise, but the range the company provided was," Jefferies & Co. analyst Daniel Binder told investors in a research note.
Meanwhile, Standard & Poor's cut its rating on the retailer after the announcement to "Buy" from "Strong Buy."
On Monday, Best Buy's largest rival, Circuit City Stores Inc., filed for Chapter 11 bankruptcy protection and said it was cutting more jobs than the thousands announced last week, citing eroding vendor confidence, decreased liquidity and the global economic crisis.
Earlier this week investors said Best Buy was poised to benefit from the collapse of its competitor and would be able to attract customers scared by the bankruptcy filing while reaping bigger sales in the coming months.
Now, experts said, there's less chance for a short-term boost, even though the chain is still likely to pick up market share.
"I think the overall market has gotten a lot worse very quickly, so they haven't had too much time to benefit from Circuit City's struggles," Lemos said.
Best Buy's same-store sales, a closely watched retail industry metric, fell 7.6 percent in October. And same-store sales between November and February may plummet by 5 percent to 15 percent, the company said. That means annual same-store sales will slide between 1 percent to 8 percent.
Adding to the company's woes is its increased international exposure, said Goldman Sachs analyst Matthew Fassler. International operations made up about 30 percent of revenue for the third quarter compared with 17 percent in the same quarter a year ago.
"The rapid appreciation in the dollar versus the euro, British pound, and Canadian dollar is pressuring international earnings," Fassler wrote in a client note, adding that sales in Canada are declining as well.
Best Buy is scheduled to post third-quarter results Dec. 16.
