Best Buy Co., the consumer-electronics retailer that founder Richard Schulze is trying to take over, cut its annual free cash flow forecast after holiday sales declined less some analysts anticipated.
Free cash flow will be about $500 million in fiscal 2013, down from a November projection of $850 million to $1.05 billion, the company said Friday in a statement. Sales by stores open at least 14 months fell 1.4 percent in the nine weeks ended from Jan. 5, compared with a projected decline of 2 percent by analysts Mike Baker at Deutsche Bank AG and Scott Tilghman of B. Riley & Co.
Chief Executive Officer Hubert Joly has cut prices and matched online rivals’ prices to compete with Amazon.com Inc. and Wal-Mart Stores Inc.
“They’re trying to drive traffic, hoping they win customers over and sell them something next year,” Michael Pachter, an analyst at Wedbush Securities in Los Angeles, said in a telephone interview Jan. 9. “But that’s not going to be enough for Schulze. He’s going to realize they did it through promotions and he’s going to want to wait to see earnings before he makes an offer.”
Best Buy advanced 5.4 percent to $12.21 at the close Thursday in New York. The shares dropped four of the past five years, including a decline of 49 percent in 2012.
Schulze, a former chairman, proposed offering $24 to $26 a share for Best Buy in August and later that month reached an agreement that let him conduct due diligence and present a fully financed offer within 60 days. Best Buy last month gave Schulze more time to study the company and arrange financing to take it private. He can make an offer between Feb. 1 and Feb. 28, allowing him to include full-year results in his due diligence, the retailer said in a statement Dec. 14. The board then has 30 days to review and decide on an offer.
Schulze has been working with three private-equity firms, including Cerberus Capital Management LP, on a takeover of the electronics chain he founded more than four decades ago, people familiar with the matter have said.
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