Best Buy Issues a Warning

On the day that Best Buy Co. (Eden Prairie, Minn.) issued a warning that third- and fourth-quarter earnings won't meet expectations, its stock price plunged 38 percent.

Analysts attributed the problems of the nation's second largest specialty chain to rising gas prices, a volatile stock market and declining consumer spending, all of which are impacting all retail. And they don't expect this climate to warm up anytime soon.

Best Buy and its rival Circuit City Stores Inc. have also cited the rising competition and pricing pressure from discount chains such as Wal-Mart and Costco Wholesale Corp. These retailers have increased their offering of popular digital electronics products. In addition, several grocery stores have begun to sell discounted electronic videodisk players.

In effort to turn things around, Best Buy is beefing up sales promotions by offering $100 rebates on notebook or desktop computers. It is also currently selling the newly released DVD “Mission Impossible II” for $14.99, about $2 cheaper than blockbuster titles generally go for.