Best Buy expecting strong holiday season

By Karen Jacobs

NEW YORK (Reuters) - Consumer electronics retailer Best Buy Co (BBY.N) is expecting stronger consumer demand for the holiday season and will likely offer targeted promotional events for loyal customers.

"For our business, we're planning it to be up -- that's what our guidance is," Michael Vitelli, executive vice president for customer operating groups at Best Buy, told the Reuters Consumer and Retail Summit.

Vitelli said Best Buy was tracking the sale of product lines and brands to determine the right inventory to have in place this holiday season as higher gasoline and fuel prices eat into consumers' discretionary spending.

He said video games and the Blu-ray high-definition DVD format would be "clear winners" this holiday selling season.

To lure consumers into stores, Vitelli said Best Buy was considering holding promotional events for select groups such as members of its Reward Zone customer loyalty program in addition to more general promotions.

"I think what is actually going to be better for us this year versus anything we've ever done is Reward Zone," Vitelli said. "We've just launched a Reward Zone tiering plan" that separates the program's 30 million members by their purchases.

Vitelli also said Best Buy was testing kiosks in "a few" stores that allow consumers to fill MP3 players with music. "The key is to see whether consumers are really going to do that versus buying online," he added.

Best Buy reported a better-than-expected first-quarter profit on Tuesday, citing market share gains in cell phones, computing and flat-panel televisions. The company has benefited over the past year as main rival Circuit City Stores CC.N made store changes that disrupted business and chains like CompUSA closed outlets.

Vitelli said a diverse product lineup that includes TVs, cell phones, computers and other categories was a factor in the strength Best Buy has seen and the company's optimism that it can boost sales even in an uncertain U.S. economy. He said companies that focused mainly on one product such as flat-panel TVs or computers have faced difficulties.

"We actually have a lot of the things that many people might consider necessities," Vitelli said. "They are certainly below food and probably gasoline as well but they are pretty high up there."

(Reporting by Karen Jacobs, editing by Mark Porter)