Top U.S. consumer electronics chains Best Buy Co. Inc. and Circuit City Stores Inc. on Wednesday reported strong quarterly profits as the lure of flat-panel TVs and other products drew more shoppers in the 2003 year-end holiday season.
Best Buy, which dominates retailing in the $100 billion U.S. consumer electronics sector, said it expects more market share gains and strong sales in the new year. Its stock jumped almost 7 percent.
Circuit City, whose reduced business expenses helped its profit growth even as it registered a lackluster sales increase, also announced a $284 million purchase of a Canadian rival as it looks to battle Best Buy, which owns top Canadian consumer electronics chain Future Shop.
Circuit City, whose shares also were up about 7 percent, said it would also buy online music seller MusicNow Inc to get into the business of selling music subscriptions. Terms were not disclosed.
Its purchase of Barrie, Ontario-based InterTan comes as Richmond, Virginia-based Circuit City grapples with increasing competition from rivals, which now include such mega-chains as Wal-Mart Stores Inc. and computer makers such as Dell Inc. Dell Inc.
With about 600 stores in the United States, Circuit City said it plans to expand sales of InterTan’s private-label electronic products into the United States by the fall. Private-label goods typically carry higher profit margins than brand-name products.
Circuit City said it expects the InterTan deal to add to its earnings in the current year, pushing its stock up. In its fiscal year ended June 30, InterTan had revenue of $403.1 million and net profit of $7.7 million.
Stacey Widlitz, an analyst at Fulcrum Global Partners, said she was surprised at the timing of the InterTan acquisition, noting that it comes as Circuit City is trying to fix its business in the United States.
“It’s certainly a distraction to what they are doing,” she said. Alan Rifkin, an analyst at Lehman Brothers added in a research note that “we believe there is much to do turn core Circuit City stores around.”
Even so, Circuit City said the deal was key as it marked its first foray into Canada.
Minneapolis-based Best Buy, investing heavily on improving customer service and staff expertise, said profit in its fourth-quarter ended March 1 jumped to $469 million, or $1.42 a share from $378 million, or $1.16 a share, a year earlier.
Analysts’ on average had expected $1.39 a share.
For the current fiscal year, Best Buy said it expects earnings per share in the range of $2.80 to $2.93, which compares with an analyst estimate of $2.79.
For its part, Circuit City did not immediately provide comprehensive results outlook for its new fiscal year. The retailer said its profit in the fourth-quarter ended Feb. 29 rose to $89.6 million, or 43 cents a share, from $70.9 million, or 34 cents a share, a year ago.
Excluding discontinued operations, quarterly profit was 46 cents a share. Analysts, on average, had expected earnings of 36 cents a share, according to Reuters Research, a unit of Reuters Group Plc.
