Jan. 16 - Investors rushed to sell shares of Best Buy after the retailer blamed massive discounting for cut into holiday revenue. Fred Katayama reports.
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Just when things seemed to be getting better, a blue Christmas slammed Best Buy and its stock. Holiday sales and revenue fell at the world's largest consumer electronics chain when analysts had expected an increase. Even the biggest gaming console launches in years couldn't lure enough shoppers to its stores.
The culprit: massive discounting that helped boost market share but cut into revenue. Tight supplies on some products and disappointing sales of mobile phones also hurt results, forcing Best Buy to slash its profit margin outlook.
Investors dumped the stock, which had tripled last year as investors bet on a turnaround. The shares lost more than a quarter of their value in early trading.
Stifel slashed its price target to $30 from $48. Analyst David Schick said, "We expect cost-cut focus to persist - but we do not see multiple expansion opportunities as robust as prior ... if there is no path to gross profit margin growth, the odds of any multiple expansion are not good."
Best Buy becomes the latest retailer to cut its earnings outlook after one of the most promotional seasons since the recession.
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