Best Buy: Fewer big-ticket sales hurt profit - Yeah, we have a great economy

[EV_Ares]

according to the Wall Street Barons who keep trying to pump up how great it is and according to GWB & his rich & now richer friends with all the tax breaks he gave them. However, for the rest of us or the middle class slowing slipping into the lower end of the middle, not so great: Look at Best Buy & Circuit City reslts. Now go to mercedes dealers, Bloomingdales, high end clothing and jewelry stores & yes the economy is great.....................

MINNEAPOLIS (AP) — Best Buy (BBY), the nation's largest consumer electronics retailer, lowered its 2008 profit estimate on Tuesday, blaming a softening economy that's steering shoppers away from high-margin items such as flat-screen TVs.
The company also reported that first-quarter earnings fell 18%, partly because of its new lower-margin business in China. Shares slid $2.83, or 5.9%, to $45.18 Tuesday.

CEO Brad Anderson said weakness in the overall economy was a major factor, skewing sales away from high-margin, big-ticket products to items such as notebook computers and gaming hardware, which don't bring as much profit.

"I think the reason those categories were soft had to do with the macro economy," Anderson said. "Some of our consumers felt the squeeze on their discretionary income. We felt that pretty directly and pretty immediately."

He said he expected improvement in the economy — and Best Buy's profits — by the end of the calendar year, however. In particular, he said the company expects television sales to pick up in the fall. "It is very heavily driven by the football season," he said.

http://www.usatoday.com/money/companies/earnings/2007-06-19-best-buy_N.htm

Circuit City Swings to Loss,Withdraws Earnings Forecast

Circuit City Stores Inc. swung to a fiscal first-quarter net loss amid sinking demand for lower-tech televisions. The company also pulled its financial guidance, citing the company's restructuring and an "uncertain macroeconomic environment."

The consumer-electronics retailer posted a net loss of $54.6 million, or 33 cents a share, for the quarter ended May 31, compared with year-ago net income of $6.4 million, or four cents a share.

Revenue fell 4.3% to $2.49 billion as same-store sales dropped 5.6%.

[Double T]

1. "Some of our consumers felt the squeeze on their discretionary income..........

We felt that pretty directly and pretty immediately." This situation will NOT change as wall street and corporate america continue to reach deeper into consumer's pockets for the absolute necessities. Credit will continue to tighten while interest rates climb.

[EV_Ares]

2. So right you are. I don't think the stock market is any kind of a barometer

of our overall economy anymore. It used to be but now it shows no reflection of main street america. Only the richness and global aspects of the other america John Edwards speaks of.

[Warpy]

3. The stock market has largely been separated from the

Main Street economy by globalization. The US is no longer the only market for cheap goods made in the third world across the planet, although it's the biggest, and any steep losses in retail sales here will be partially offset by increasing sales elsewhere. Killing the consumer market in the US by pushing wages down is not the disaster for multinationals it would have been thirty years ago. They can do that now and still manage to stay in business.

In other words, the American consumer has become expendable to the multinational corporation.

[EV_Ares]

6. Don't know if you watch Lou Dobbs or not but the other night he was

talking about where China who has to pay a tariff on their products coming into this country and they are now building a 300,000,000 auto plant in Mexico at Tijuana where they can ship their cars into the US tariff free because of our laws with Mexico. Dobbs was beside himself talking about this and how idiotic our government is where they can do this.

[Warpy]

8. Dobbs just scratched the surface, then

because the countries outside NAFTA that looted our industry are all highly protectionist. This is why the US is the one country on the planet that has been devastated by the dogma of free trade. We're playing the game. They are not.

[The2ndWheel]

7. I keep saying Henry Ford was in the wrong place, at the wrong time

Women didn't have the money back then. Black people weren't considered to be human(even less than women). There wasn't the same access to billions of consumers and producers around the globe. Automation and mass production were still finding their way.

If Ford were around today, he wouldn't have to pay his white male workforce enough to buy the products they made. There would be more products than we know what to do with, making them cheap. There would be more people buying more of the products because they're cheaper. Plus everything would be on credit anyway, and everyone would be in debt.

Ford didn't do what he did because he was a nice man. He did it because there weren't as many people that could buy the products, and he had no other means of making the products that made him a fragillionaire. If he could've moved the plants to China at the time, and make more money, he would've.

What I'm trying to say is that we've always been on the edge of expendability, we just didn't know it.

[jsamuel]

4. we are also paying off more debt than we are taking out for the first time

in a really long time. That could hurt BB too.

[Blackhatjack]

5. Just bought a low end appliance 0% and 12 mos no pmts, what does that tell you?

People out there are not buying the 'medium priced' appliances, and when they do purchase an appliance they cannot live without they need the store to provide it to them 'no money down/no interest/no pmts' to make the buying decision.

How is the store making a profit on these sales? They aren't.

The stores are playing for time --hoping to keep inventory rolling through and enough time to pass for the economy to pick up. Their ace is that enough people will not be able to pay off their purchase in 12 mos and will be hit with huge accrued interest(30% in some cases) but will make monthly pmts.

The judgment day for this economy is likely less than 12 mos away --when middle class and working class families are tapped out and cannot pay the bills on items they have purchased on credit. Factor in raised interest rates, higher adjustable mortgage pmts, rising prices and stagnant wages and you have all the makings for a disaster.

Best Buy and Circuit City may disappear, and Walmart is poised to dominate what is left of the market.

[Blackhatjack]

9. There is definitely a lot of 'treading water' financially going on...

Individual families and retailers are trying to make it through this downturn in the economy by trying to perserve their status quo. Not much is being done to address the actual problems.

Hoping that things will get better on their own is NOT going to cut it.