October 31, 2008 / 12:26 AM / 11 years ago

UPDATE 2-Best Buy exec expects consolidation

(Adds company comment, detail on holiday plans)

By Karen Jacobs

MINNEAPOLIS, Oct 30 (Reuters) - Electronics retail leader Best Buy Co (BBY.N) would look to snap up some stores closed by distressed rivals, an executive said on Thursday.

“I think there’s going to be a number of storefronts that close down,” Best Buy President and Chief Operating Officer Brian Dunn told reporters at company headquarters.

He added that Best Buy would seize opportunities to pursue stores closed by rivals should the vacant space make sense for the company’s brands.

“If store fronts close, a big number, you can bet that we will jump in and connect with those customers ... and take advantage,” Dunn said. “If there’s a big opportunity, we’re going to absolutely go after it.”

Earlier this month, The Wall Street Journal reported and some analysts wrote that smaller rival Circuit City Stores Inc(CC.N) might close hundreds of stores in a bid to improve performance.

Circuit, the No. 2 electronics retailer, has said that all options, including store closures, are on the table as it tries to reverse a prolonged earnings and sales slump.

“If Circuit City did go out, I would not be jumping up and down,” Dunn said. “I think it would be a sad day for the industry.”

Dunn also said that Best Buy intends to grow, not cut, its way through the current business slowdown. For example, he said his company planned to roll out more stand-alone Best Buy Mobile stores this year, reaching as many as 40 by year-end. He said the company aimed to reach a 10-12 percent market share in its mobile business in three years from about 2-4 percent share today.

Best Buy also said that so far it has seen no change in terms from vendors.

HOLIDAY STRATEGY

To lure holiday shoppers amid the slowing U.S. economy, the Minneapolis retailer said it plans to focus on value-priced products and service.

That includes making sure that store workers are available to aid customers and offering a broader assortment of some products at lower prices as well as financing options to purchase.

Ads for Black Friday, also known as the day after Thanksgiving, will air beginning Nov. 25 and will focus on persuading consumers to make Best Buy a destination store.

The retailer also will offer exclusive shopping events in its stores for groups such as its 33 million “Reward Zone” customer loyalty program members, and a smaller group of about 1 million shoppers who spend at least $1,500 a year in its stores.

It expects hot-selling products this holiday season will include cell phones, laptop computers, games, navigation systems, flat-panel TVs and digital frames.

Best Buy also said it will continue to provide different payment options for consumers, such as a program that gives no-interest financing for 18 months on total store purchases of at least $499.

“Financing resonates more with consumers this year,” said Ryan Robinson, chief financial officer for the U.S. business.

Earlier this month, Best Buy said sales at stores open at least 14 months fell about 2 percent in September amid the global financial crisis.

Mike Vitelli, executive vice president for customer operating groups, said demand for discretionary items such as wide-screen flat-panel televisions and higher-end appliances slowed in the past month.

Despite the recent sales slowness, Best Buy said it was continuing to gain market share, and Vitelli added he expects sales of flat-panel TVs to bounce back.

“We’re confident that we’re still gaining share in a tough environment,” Vitelli said.

To fuel holiday sales, Best Buy was offering a broader assortment of smaller flat-panel TVs at “traditional” price points, he added.

The retailer said it also has expanded its offerings of accessories such as cases for laptops and mobile phones, offering more colors than the traditional black.

In recent days, a number of analysts have lowered earnings estimates for Best Buy, saying tumbling consumer confidence will challenge its holiday sales.

Circuit City Stores said on Thursday that it had received notice from the New York Stock Exchange that it does not comply with the exchange’s stock-price standard. Circuit City’s average closing price was less than $1.00 over a consecutive 30-day trading period as of Oct. 22, it said.

Best Buy shares rose 6.3 percent to close at $24.61 on the New York Stock Exchange on Thursday. (Reporting by Karen Jacobs, editing by Matthew Lewis)

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