Best Buy, but Nobody's Buying

• Email
• Share
• Print

Chilling it is, but surprising it's not. I had a feeling a litany of bad news was coming, and maybe you did, too. Best Buy (NYSE: BBY) is the latest to underline just how ugly things are in the current quarter.

Best Buy lowered its guidance for fiscal 2009 (the current year). CEO Brad Anderson said, "Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen. Best Buy simply can't adjust fast enough to maintain our earnings momentum for this year."

The retailer said same-store sales for the four months left in fiscal 2009 could fall by 5% to 15%. Best Buy now expects earnings of $2.30 per share to $2.90 per share, compared to previous guidance for earnings of $3.25 per share to $3.40 per share. The wide discrepancies illustrate the degree of uncertainty right now.

Best Buy's stock's getting clobbered, but it's not alone in its woes. We've heard sobering tidings from many companies lately, including Starbucks (Nasdaq: SBUX), Whole Foods Market (Nasdaq: WFMI), and Bare Escentuals (Nasdaq: BARE). Expect more gloomy news.

There has been good reason to believe that this holiday season was going to be the equivalent of coal in Christmas stockings, and that consumers will be cutting out items that are simply too luxurious for the current economic situation. And these factors have as much or more to do with consumers' burdensome debt as job losses do, people.

I admit all the news is scary. And be prepared, because it's just going to get scarier. But to be forewarned is to be forearmed, and all the fear will yield opportunities for stock in some of the greatest companies around at cheap prices.

My game plan involves looking for the ones with plenty of cash, little debt, great brands, and competitive advantage, and of course, these are companies to plan to hold for the long term. As far as I'm concerned, Best Buy fits; given its smart management and customer-centric strategies, I'd rather be snapping up that stock than say, RadioShack (NYSE: RSH). (And we already know what woes have befallen Circuit City, and Chapter 11 or worse will likely befall other weak retailers, too.)

Best Buy also said in its press release that it's improving market share. That's the kind of thing that investors should also remember -- the winners that weather the storm will have brighter futures.