I Did Taw a Putty TatWednesday's slide was precipitated by a warning from Tweeter ( TWTR), a smaller chain that caters to high-end consumers, of a shortfall in sales and earnings. Last Friday, similar comments from Circuit City ( CC)
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Tough week for electronics seller
"The main cause for the sales decline is a slowdown in traffic coming into the stores," said Tweeter in its statement. "This is being reported in every region." In addition to the fall in traffic, Tweeter also blamed inventory shortages in key products such as flat-screen televisions. Circuit City -- which has its own problems because it is trying to revamp most of its stores -- also blamed inventory shortages as one reason for its shortfall. But that problem isn't likely to plague Best Buy, say analysts, because it's the biggest player in the industry. Vendors simply do more to please their largest customer. "I think it is a little premature to sell off the Best Buy shares today," says Todd Kuhrt, an analyst at Midwest Research. "I wouldn't want to make the assumption that just because Tweeter, along with Circuit City, is showing some weakness, that Best Buy is going to make a disappointing announcement." (He has a neutral rating on the stock and his firm does not do investment banking.) In a note published Wednesday Salomon Smith Barney analyst William Julian agreed, saying Tweeter isn't an appropriate comparison because of its high-end focus. He also said that Best Buy has indicated to him that traffic levels remain strong and that the Eden Prairie, Minn., company doesn't face inventory problems similar to ones that have hurt Circuit City. (He reiterated his buy rating and has not had a recent banking relationship with Best Buy.) Best Buy said that as a matter of policy it doesn't comment on current-quarter financials.