US earnings - electronics retailers feeling the pinch

On Tuesday Best Buy Co. (BBY) the biggest retailer of electrical goods in the US reported an 18% decline in 1Q07 profit. The company cited heavy sales of low-margin items such as notebook computers and gaming hardware as impacting on profits. They expect the trend to continue and lowered their full years earnings forecast accordingly. The company called the reigning in of consumer spending on electronics as "the first industry-wide interruption in six years".

However if you thought that was on the gloomy side the rest of the electronics retailers are having a much worse time of it.

Circuit City Stores (CC) reported a loss for 1Q07 as expected by analysts whilst they undergo an attempted turnaround of the business. A look at the financials tells a story of rising expenses and declining margins. In addition management gave little to cheer about saying they expect further volatility in earnings going forward and withdrew their full year earnings outlook.

Add to that the announcement by Tweeter Home entertainment group (TWT) last week that it had filed for bankruptcy and you'd have to say electronics retailers are having a tough time of it. It begs the question in what other segments of the retail landscape are consumers reigning in their spending and are the robust consumer spending figures of recent months telling the full story?

On the positive side Morgan Stanley (MS) posted a 40% rise in profit for 2Q07 easily beating analysts expectations.

Fed Ex (FDX) posted a 7% lift in earnings but after stripping out one-off items was slightly below market expectations.

Also in the news Home Depot has decided to buy back a massive $22.5bn of it's own stock after announcing the sale of it's supply business for $10.3bn.