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Electronics chains click
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December 18, 2001: 3:23 p.m. ET
Best Buy and Circuit City beat estimates on higher holiday sales.
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NEW YORK (CNN/Money) - Best Buy Inc. posted a 40 percent jump in fiscal third-quarter profit Tuesday, beating Wall Street expectations by a penny a share, while rival Circuit City saw its quarterly results improve from a year earlier as consumers continued to snap up electronic gadgets for the holidays.
Best Buy's (BBY: up $3.16 to $72.16, Research, Estimates) stock jumped on the news while Circuit City's (CC: up $0.06 to $23.76, Research, Estimates) stock also rallied.
Consumer electronics has emerged as one of the stronger retail sectors in an otherwise gloomy holiday sales season this year as the slowing economy was helped into a recession by the Sept. 11 terrorist attacks that put a damper on consumer spending.
New innovations in digital cameras and television, lower prices on DVD players and highly polished video game and console offerings are helping to drive electronics sales. Though not as robust as merchants would like, electronics sales are likely to come in slightly higher than a year earlier, said Peter Benedict, a retail analyst at CIBC World Markets.
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Best Buy CEO Richard Schulze chats with CNNfn about the company's results.
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Though Best Buy's numbers cheered Wall Street, a good chunk of its gains came from its recent acquisitions of SamGoody, Musicland and other chains and aggressive store openings in the period.
Benedict said that struggling Circuit City's better-than-expected profit after posting a loss of 32 cents a share a year earlier, is clearer evidence of the strength consumer electronics commands right now.
"The bottom line is Circuit's numbers were better than expected. Our fear was that they were buying sales. They were promoting really hard, so they weren't going to make much money off of sales," Benedict said. "Consumer electronics was always bound to be a hot product. The new gaming systems made a lot of splash and digital cameras continued to be a hot gift item."
Benedict and other analysts have said Americans' tendency to focus more on their homes and family since the Sept. 11 attacks on the World Trade Center and Pentagon have also helped bolster sales of home theater systems, DVDs, televisions and other related items.
Overall, retail sales declined in the first few weeks of December, according to two reports released Tuesday indicating that Americans are putting off the bulk of their shopping until the last minute, remaining cautious in the wake of the sluggish economy.
Retailers have resorted to steep discounts this year in hopes of driving sales and unloading inventory.
For the quarter ended Dec. 1, Best Buy, the nation's biggest consumer electronics chain, reported earnings of $80 million, or 37 cents a share, up from earnings of $57 million, or 27 cents a share, a year earlier. Analysts on average anticipated a profit of 36 cents a share, according to earnings tracker First Call.
The company also reaffirmed fourth-quarter expectations for earnings of $1.25 to $1.30 a share. Analysts are anticipating earnings at the lower end of that range at $1.26 a share, according to First Call.
Sales jumped 27 percent to $4.8 billion from about $3.7 billion.
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 THE NUMBERS
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Best Buy - 37 cents vs 27 cents Circuit City - 10 cents vs loss 32 cents
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Best Buy also said it anticipates sales at stores open at least a year, a key figure known as same-store sales, to be flat to up 2 percent in the fourth quarter, reflecting a shift in the retail calendar this year that has affected the entire industry.
Meanwhile, Circuit City posted third-quarter results ahead of Wall Street expectations as sales improved from the year-earlier quarter.
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For the quarter ended Nov. 30, Circuit City reported earnings of $27.7 million, or 10 cents a share, compared with a loss of $62.5 million, or 32 cents a share, a year earlier. Analysts anticipated a profit of 7 cents a share, according to First Call. The company's results include earnings from the company's Circuit City electronics stores and its retained interest in CarMax auto dealerships.
Third-quarter sales increased 6 percent to $3.05 billion from $2.89 billion. 
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