Best Buy cuts year forecast as sales soften

ATLANTA (Reuters) - Top electronics retailer Best Buy Co (BBY.N: Quote, Profile, Research, Stock Buzz) cut its full-year outlook on Friday, saying fourth-quarter sales would miss its expectations as the softer U.S. economy hurt January store traffic, pushing its shares down 3 percent.

Lower revenue for advanced televisions, MP3 devices and video games will result in a modest fall in sales at stores open at least 14 months, or same-store sales, Best Buy said.

"The macroeconomic environment grew more challenging after the holidays," Jim Muehlbauer, interim chief financial officer, said in a statement. "Our post-holiday results are not going to be what we originally expected."

Shopper traffic declined in January as U.S. consumers hesitated to part with their dollars in the face of higher food and fuel costs and a slowing housing market, the company said.

Best Buy now expects to earn $3.05 to $3.10 a share for the year that ends March 1, down from a forecast of $3.10 to $3.20 a share given in December. Analysts on average expect full-year earnings of $3.17 a share, according to Reuters Estimates.

Best Buy said it expects sales of nearly $40 billion for fiscal 2008 on same-store sales growth of 2.5 to 3 percent. It had previously forecast same-store sales to rise about 4 percent.

"If the quality and segment leader is struggling, one can only imagine how poorly others in the space are doing, with (main rival) Circuit City (CC.N: Quote, Profile, Research, Stock Buzz) being top of mind," Credit Suisse analyst Gary Balter said in a research note.

Richmond, Virginia-based Circuit City Stores has posted losses over the past year and is aggressively cutting costs in a bid to restore profitability.

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