Best Buy Profits Rise As Circuit City Flounders
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Best Buy Co., the largest American consumer-electronics retailer, said fourth-quarter profit rose on redemptions of gift cards, while Circuit City Stores Inc. had a loss because of holiday discounts and costs to fire workers.
Net income for Best Buy climbed 18% to $763 million, or $1.55 a share. Circuit City, its closest rival, posted a loss of $12.2 million, or 7 cents a share. The company had a pretax charge of $144.6 million partly from trimming 3,400 employees.
Best Buy boosted profit by managing a drop in flat-panel television prices better than Circuit City and increasing revenue from gift cards. Its sales jumped 21%, the most in three years. Circuit City slashed television prices to compete with rivals including Wal-Mart Stores Inc. and reported a 1% gain in sales, its smallest in three years.
“Best Buy is clearly out-executing Circuit City,” a managing director at Mason Street Advisors, David Keuler, said. “They’re doing the things they should do.”
