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download (9)With Black Friday coming next week and the holiday shopping season swinging into full gear, entertainment retailer Best Buy warned that its margins may not be able to sustain a price war with its competitors.

Releasing third quarter numbers that represent a strong turnaround from a net loss during the same period last year, Best Buy also acknowledged that its competition, including retailers such as Walmart and Target and e-tailers such as Amazon, could force Best Buy into a promotions war. Such a battle over discounted pricing could cut deeply into Best Buy’s recovering margins.

Best Buy CFO Sharon McCollam said the following about her company’s precarious position this holiday season:

“If our competition is in fact more promotional in the fourth quarter, we will be too, and that will have a negative impact on our gross margin,”

Best Buy has already largely turned its back on home entertainment media such as DVDs and Blu-ray discs by greatly shrinking the amount of floor space devoted to such items.

Is there any hope for large, more traditional retailers such as Best Buy when there are so many—and often cheaper—alternatives?

[via Home Media Magazine]

3 Responses to “Best Buy Warns That Holiday Margins May Suffer from Promotions”

  1. Visitor [Join Now]
    Veron Dent [visitor]

    Consensus forecast for the upcoming holiday season is an approximately 12% INCREASE over 2012.

    BestBuy should be able to offset slim margins with greater revenues this year.

    Happy Holidays!

  2. Visitor [Join Now]
    marissadad [visitor]

    Power to the People, right on. Sorry Wall Street, it’s our turn to laugh all the way to the bank.

  3. Visitor [Join Now]
    Mike [visitor]

    Best Buy continues to dig it’s own grave. The days are limited for this company.
    I, for one have stopped shopping there since they drastically cut out over 75% of their media section. Going with the Redbox business model of only selling new releases won’t fetch much appreciation with the bargain hunters out there which is a ever growing population in today’s economy.