24/7 Wall St.

Best Buy Co., Inc. (NYSE:BBY) has issued an earnings warning this morning.  The electronics and home appliances retailer is noting a fall in consumer spending, driven by the recent turmoil in the financial markets and other macro economic factors.  Uncertainty regarding future consumer spending has limited its ability to project revenue for the critical holiday shopping season and the balance of the fiscal year.

It is echoing what has been seen elsewhere: a rapid drop and change inspending habits has taken place since mid-September.  This has created the most difficult climate that thecompany has ever seen.

It also can not adjust fast enough to maintain earnings momentum and it is beginning to adjust its cost structure.    

The sales numbers look atrocious and show that no place is immune rightnow.  The company’s total comparable store sales fell by roughly -7.6%for October after a modest comparable store sales decline forSeptember.  The company is also expecting a sharp drop ahead withcomparable store sales for the four months remaining in fiscal 2009(NOV-08 to FEB-09) could drop to -5% to -15% and now expects thatannual comparable store sales will show a decline of -1% to -8%.

The rising dollar is also expected to lower the international numbers.The company said the low end of its range for the year is now $2.30 EPSand $43.7 billion in revenues.  Its prior range was $3.25 to $3.40 EPS.

The good news is that this gives a P/E ratio of roughly 10-times basedon yesterday’s close.  If you like low P/E’s that will be even lower nowthat shares are down 14% pre-market at $20.40.  The recent lows of the52-week trading range are $20.00, down from a high of $53.90.

For whatever this is worth, the Houston Galleria location looked pretty dead this last Saturday.

Jon C. Ogg
November 12, 2008