Best Buy shares down after credit rating cut

ATLANTA (Reuters) - Best Buy Co (BBY.N) shares fell more than 11 percent to a new year low on Wednesday, a day after Standard & Poor's cut its debt rating on the electronics retailer to the lowest investment grade.

On Tuesday, S&P Ratings Services lowered its corporate credit rating on Best Buy to "BBB-" from "BBB," saying credit metrics would weaken more than projected as consumers pulled back spending.

"Unfortunately, in this market environment, putting the word credit next to a retailer is toxic," Credit Suisse analyst Gary Balter said in a research note on Wednesday.

Balter added that while sales and margins will likely be under pressure near term, "Best Buy is a franchise that will survive."

Last week, the No. 1 U.S. electronics chain slashed its profit forecast, citing "seismic changes" in consumer behavior amid a deepening economic crisis. The company said its sales at stores open at least 14 months fell about 7.6 percent in October after declining 1.3 percent in September.

Best Buy "will be more challenged than previously expected by the current weak economic environment in the U.S.," S&P Ratings Services said.

Best Buy's profit warning came two days after smaller rival Circuit City Stores Inc (CCTYQ.PK) filed for bankruptcy protection in the wake of tighter credit terms from suppliers.

On Monday, Fitch Ratings revised its outlook on Best Buy to negative from stable, citing the pressure on the retailer's same-store sales.

Best Buy shares were off $2.21, or 10.5 percent, to $18.76 in afternoon New York Stock Exchange trading. Earlier in the session, the stock reached $17.53, a level not seen since about 2003.

(Reporting by Karen Jacobs, editing by Gerald E. McCormick)