Electronics sales boost Best Buy

MINNEAPOLIS -- Best Buy Co., the nation's largest consumer electronics retailer, reported a 52-percent jump in third-quarter profits and it raised its guidance for the full year.

Best Buy's third-quarter profit was well ahead of analyst expectations. TV prices fell less than last year. Best Buy added stores, but kept a lid on corporate expenses. And a fluke in the calendar plopped an extra week of post-Thanksgiving holiday shopping into the third quarter.

But what the calendar gave in the third quarter, it will take away in the fourth. Without giving formal quarterly guidance, interim Chief Financial Officer Jim Muehlbauer acknowledged on a conference call that the results implied fourth quarter earnings of $1.70 per share to $1.80 per share. Analysts expected $1.82.

Best Buy has been gaining market share by focusing more intensely on customer needs, and is expected to be a key beneficiary this holiday season as shoppers buy games and fancier TVs. The retailer makes 70 percent of its full-year earnings in the second half.

"We're seeing strength in fairly high price-point merchandise," Best Buy Chief Executive Brad Anderson said. "I think the consumer is stronger than some of that fear that's being registered."

The Richfield, Minn.-based company said the rapid revenue growth of the third quarter would slow in the fourth because the extra holiday shopping week falls in the third quarter, and because this year's fourth quarter is one week shorter than last year's.

Muehlbauer said December is "trending within the range of our predicted outcomes for the quarter."

"Historically we know that our customers are shopping later and later each year. Accordingly we were planning and are prepared for a strong finish for the holiday season," he said.

Same-store appliance sales declined 1.8 percent for the quarter -- and the decline was steeper in Best Buy's U.S. stores, offset by strong growth in international appliance sales, especially China.

Best Buy said it would spend $900 million for the year on new stores and better cash register technology. It said it expects to open about 150 new stores during the current year, up from about 135 it planned previously.

Best Buy has begun selling musical instruments at four stores-within-a-store in California, and plans to add more in the year ahead. President and Chief Operating Officer Brian Dunn said the idea makes sense because of the way music and technology are converging.