Best Buy (NYSE: BBY) 1Q Profit Falls 15 Percent, Exceeds Forecasts

Best Buy Co. (NYSE: BBY) reported Tuesday that its first-quarter earnings fell 15% despite rival Circuit City Stores Inc. (NYSE: CC) going out of business.

The earnings exceeded Wall Street analysts’ expectations as Best Buy, the nation's largest consumer electronics seller, maintained its annual profit outlook.

Best Buy stock dropped $2.86, more than seven percent, to $35.80 in late-day trading.

The company earned $153 million, or 36 cents per share, in the quarter that ended May 30. This amount compares with profit of $179 million, or 43 cents per share, a year earlier when federal stimulus checks briefly caused a surge in consumer spending.

Adjusted profit was 42 cents per share. Analysts surveyed by Thomson Reuters expected 34 cents per share.

Revenue rose 12 percent to $10.1 billion as it opened 185 new stores and gained some market share from the closed Circuit City Stores. The company said it had gained 2 percentage points of market share for the three months that ended April 30, fueled by sales of TVs, computers and mobile phones. Circuit City closed the remainder of its store ocations on March 8.

"Our share gains accelerated during the quarter since a major competitor closed its doors, something we've been very purposeful in planning for and -- to be blunt -- taking advantage of," Brian Dunn, Best Buy's president and chief operating officer, told investors during a conference call following the earnings release. Dunn becomes CEO on June 24.

Best Buy, which has about 22 percent of the market in consumer electronics, according to a Deutsche Bank report, hopes its sales staff and its Geek Squad paid service will help differentiate it from discounters like Wal-Mart. Wal-Mart Stores, Inc. (NYSE: WMT) has about 14 percent of the electronics market, according to Deutsche Bank.

Best Buy held to its forecast of annual earnings between $2.50 and $2.90 per share, including restructuring charges. Analysts project $2.79 per share.

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