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Non-Tech : BBY -Best Buy
BBY 66.81-1.6%Oct 6 4:00 PM EDT

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From: Neil H12/15/2009 11:30:11 AM
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Best Buy Earnings: Shares Slump Despite Bottom-Line Beat

By Matt Phillips
Profit margin concerns have shares of Best Buy down 6.9%, despite the bottom-line beat delivered by the electronics retailer.

One thing that seems to have gotten the attention of investors is the company’s note that “improved revenue outlook for the fiscal fourth quarter will primarily be driven by categories in the domestic segment with lower gross profit rates such as notebook computers and entry price-point televisions across all screen sizes. As a result, the company anticipates a lower fiscal fourth quarter gross profit rate than previously expected.” Translation?: Customers seem to be trading down and buying lower price items.

J.P. Morgan analysts note that “this fuels concerns on the commoditization of the product cycle and that the bankruptcy of [Circuit City] is not relieving the competitive environment with Walmart and Amazon continuing to push into the space.” In short, Wall Street was hoping that the demise of Circuit City would lead to not only fatter sales but also juicier profits. From the look of it, that doesn’t seem like it’ll happen in the fourth quarter.
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