Best Buy's profit, sales top views

Robust demand for flat-screen TVs and GPS devices fueled strong profit and sales growth at Best Buy stores last quarter.

NEW YORK (CNNMoney.com) -- Best Buy, the No. 1 electronics retailer, posted much better-than-expected third-quarter profit and sales Tuesday, which it attributed to an extra sales reporting week last month and new store openings.

Minneapolis-based Best Buy (BBY, Fortune 500) posted net income of $228 million, or 53 cents a share in the quarter, which included Black Friday, or the day after Thanksgiving that marks the start of the holiday shopping season. That compares to net income of $150 million, or 31 cents, a year earlier.

Revenue jumped 17 percent to $9.9 billion in the quarter. Analysts polled by Thomson Financial has forecast earnings of 41 cents on revenue of $9.4 billion.

Sales at Best Buy stores open at least a year, which is a key measure of retail performance known as same-store sales, rose 6.7 percent in the quarter.

Best Buy said a shift in this year's sales reporting calendar, which gave retailers an extra week in November versus last year, helped boost its results. However, the company cautioned that it expects the same calendar shift to constrain same-store gains in December and the fourth quarter.

Given that December is its largest earnings month of the year, Best Buy's warning spooked investors who pushed the company's stock down about 3 percent on the New York Stock Exchange even after it upped its full-year profit guidance to between $3.10 to $3.20.

The company's previous forecast was for a profit of between $3.00 to $3.15 a share.

Analysts currently expect the retailer to earn $3.12 a share for the year.

CEO Brad Anderson said Black Friday, combined with the Thanksgiving holiday weekend was a success for the retailer.

"Black Friday sales were very encouraging. But the truth is that [holiday] shopping starts much before Black Friday," Anderson said during a conference call with with analysts to discuss the company's results.

"This year we used Bestbuy.com to communicate our holiday strategy to consumers in advance of Black Friday," he said. "We saw record volume in shoppers and the wait time [at checkout] was shorter than ever."

Although a less promotional environment this year lifted Best Buy's profits, some analysts expressed concern that an overall sales slowdown in early December could also depress the retailer's results this month.

Jim Muehlbauer, the company's interim chief financial officer, acknowledged that the holiday shopping pace had slowed after Black Friday. Nevertheless, he said Best Buy was "planning and prepared for a strong finish to the holiday season."

The company did not provide a fourth-quarter sales forecast but analyst expect it to log revenue of $13.6 billion for the quarter and $39.8 billion for full fiscal year, according to Thomson Financial.

Best Buy said strong demand for flat-panel TVs, notebook computers and GPS devices drove its same-store sales gains in the quarter and helped to offset sales declines in projection and tube TVs, DVDs and CDs.

Gross profits benefited from Best Buy being less promotional overall on its more expensive items like home theater systems.

Entertainment products, including video game systems, posted the biggest same-store sales increase of 23.1 percent in the period followed by a 6.5 percent gain in sales of home office products and a 2.4 percent same-store sales gains in consumer electronics.

However, the electronics category accounted for 41 percent of Best Buy's revenue in the quarter.

Within electronics, GPS products had the biggest sales gains and flat-panel TVs saw double-digit sales increases. But Best Buy said total television sales were unchanged year-over year as flat-panel TV growth was offset by declines in comparable store sales of projection and tube TVs.

Best Buy's higher-margin installation and repair services offered by its Geek Squad team, reported a 5.6 percent same-store sales gain in the period.

Separately, the company said it would spend $900 million in capital expenditure this year to invest in new store openings and information technology.

Best Buy now expects to open about 150 new stores globally in the year, up from its previous target of between 130 to 135 stores.

Next year, Anderson said Best Buy would focus its merchandise strategy on adding more private-label brands as well as offering customers exclusive branded products from its vendors.

He said the retailer was also testing sales of musical instruments in a 2,500 square feet "store within a store" format at one of its locations in California.

"We have four of these concepts in testing right now and we'll be adding more next year," Anderson said.