Check Out how Best Buy missed expectations.

The top U.S. consumer electronics retailer checked in with a lower-than-expected profit on Tuesday, as it still had trouble selling videogames and digital cameras to cautious shoppers.

Its profit fell to $158 million, or 37 cents per share in the second quarter that ended Aug. 29, from $202 million or 48 cents per share, a year earlier.

Excluding a tax impact, its profit was 40 cents a share, while analysts had expected Best Buy to post a profit of 41 cents per share.

The failure of Circuit City, which closed its doors early this year, has helped Best Buy gain market share in past months. But the latter’s failure to meet profit expectations stood out in the broader retail sector, where several other companies have leaned on cost cuts and lower inventory to compensate for weak demand.

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Check out the slowing sales at Diageo.
 
The world economy is in a shambles. You would think people would drink more, not less.
 
But Diageo — the folks who make Smirnoff vodka, Guinness beer and Johnnie Walker whisky — warned today that sales growth was slowing – a lot.
 
The company slashed its profit growth forecast and said it did not expect any improvement in the second half of the year from slowing sales growth it saw in the first half.
 
“What we are seeing is sales growth slowing. Consumer demand is soft in certain parts of the world, we are seeing some destocking and we are stopping some orders where we have concerns about credit quality,” Finance Director Nick Rose said in an interview.
 
The company also said it would cut an unspecified number of jobs as part of a program aimed at reducing costs by $144 million
 
Hopefully, somebody will by those displaced workers a drink.
 
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(Reuters photo)

Check Out the joy at Kraft and Kellogg.

Both Kraft, the largest North American food maker and Kellogg, the world’s largest cereal company, posted third-quarter profits that topped Wall Street’s expectations thanks to price increases and new items. The results are yet another nod to the fact that while you may shun clothes, jewelry or furniture during crunch times, you still gotta eat.

But Chief Executive Irene Rosenfeld of Kraft, with brands from its namesake cheese and Maxwell House coffee to Oreo cookies and Toblerone chocolates, warned that tight credit conditions could cause some retailers to liquidate their inventories, which could affect product shipments in the fourth quarter.

Still, the company stood by its forecast for 2008 earnings before some one-time items and for 2009 net income.

For its part, Kellogg, which makes Rice Krispies and Pop-Tarts, said it was confident about touching the high end of its 2008 per-share earnings target.

Other companies in the consumer and retail world that also revealed quarterly results on Wednesday include Procter & Gamble, Jones Apparel, Williams-Sonoma, and Office Depot.

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Check out retailer’s different views on future profits.
 
Kohl’s, the mid-priced department store, says it expects third quarter earnings to be better than expected, while upscale Nordstrom cut its forecast range.
 
That’s not to say that Nordstrom’s consumers are flocking to Kohl’s as the U.S. economy suffers. Kohl’s profit fell in the second quarter. But cutting inventory was enough for it raise its profit estimate for the full year. Deutsche Bank retail analyst William Dreher also said the company will be able to set itself apart with fresh merchandise because it cleaned out its inventory.
 
Nordstrom, meanwhile, cut its full-year profit outlook. But while its customers are spending less, the retail chain says they are not trading down.
 
And if they were, they certainly aren’t trading down to J.C. Penney, which saw a 36 percent drop in profit and forecast third quarter earnings below analysts’ estimates. Sales also fell 2.5 percent.
 
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Check out how bad retail sales can actually mean good earnings.
 
It all comes down to inventory management. Retailers have aggressively cut inventory levels in order to cope with the slumping economy.
 
The bad news resulting from that strategy came last week when many retailers posted disappointing sales, in part because they had less goods on hand to sell.
 
“Our inventory levels in … clearance and transitional categories were significantly lower than last year, affecting sales results, but leading to improved gross margins,” Kohl’s Chief Executive Larry Montgomery said in a statement.
 
But the good news could come over the next several weeks, when retailers report second-quarter earnings. Those slashed inventories should have helped them preserve margins, which help profits.
 
So it’s not like the U.S. consumer is buying that much. But at least retailers didn’t get left with shelves of unwanted inventory.
 
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