(Reuters) - Best Buy Co (BBY.N) reported weaker-than-expected quarterly results and cut its profit outlook for the year as shoppers held off on buying televisions and other nonessential items in the anemic U.S. economy.
Tuesday’s news pushed the top electronics chain’s shares down more than 8 percent to their lowest level since December 2008, and highlighted the fragility of recovery in the world’s largest economy.
Best Buy said that profit in the year will be as much as $3.45 a share, excluding share repurchases, down from its prior forecast of as much as $3.55 a share. It still expects revenue of $51.0 billion to $52.5 billion.
The retailer has seen sales slow in markets such as Europe and Canada as well.
“Looking at the big picture worldwide, we’re still facing an uncertain macro environment with volatile consumer shopping behavior,” CEO Brian Dunn said on a conference call.
Most than a quarter of Americans expect to spend less during the holidays this year, a survey showed, in an early sign that retailers will have to try harder to win shoppers this holiday season.
Amazon’s prices on televisions remain 12 percent to 14 percent below Best Buy‘s, Deutsche Bank analyst Mike Baker said recently.
“People are savvy and will comparison-shop online,” Wedbush analyst Michael Pachter said. “There’s nothing Best Buy can do except lower its cost structure by getting out of big-format real estate and open some smaller stores.”
In the quarter, Best Buy’s gross margin fell again.
This “raises the question about whether price is the primary weapon to drive sales, a worrisome longer-term scenario for a company with a massive investment in infrastructure and major efforts to grow the service side of the business,” Credit Suisse analyst Gary Balter said.
CEO Dunn fought back. “I think the core fundamental thesis that investors are missing about us right now is that this world isn’t moving to a place where it’s digital all by itself or physical all by itself, neither alone will be sufficient,” he said.
Best Buy shares were down $1.71 at $23.25 Tuesday afternoon on the New York Stock Exchange. They touched a three-year low of $22.75 earlier in the day.
Best Buy has now decided to offer products online from other sellers through its new third-party Marketplace as it tries to better compete with Amazon and online auctioneer eBay Inc (EBAY.O).
On Tuesday, Dunn welcomed Amazon’s agreement to start collecting sales tax in California next year.
“We see it as a march to the inevitable leveling of what has been an unfair playing field,” Dunn said.
The retailer, seen as a bellwether in consumer electronics, said its second-quarter sales were essentially flat at $11.3 billion. Analysts expected about $11.5 billion.
Sales at stores open at least for 14 months fell 2.8 percent in their fifth straight quarterly decline.
The results echoed those from smaller rival hhgregg Inc HGG.N as well as office supply chains Office Depot Inc ODP.N and OfficeMax Inc OMX.N, which reported weak sales of technology products in the key back-to-school season.
Second-quarter net profit fell to $177 million, or 47 cents a share, from $254 million, or 60 cents a share, a year earlier. Analysts on average were expecting 53 cents a share, according to Thomson Reuters I/B/E/S.
Shares of Best Buy were down $2 at $22.96 on the New York Stock Exchange.
Reporting by Dhanya Skariachan and Liana Baker in New York, editing by Gerald E. McCormick, Dave Zimmerman, Lisa Von Ahn and Gunna Dickson