"Flat-panel shipment dollars have decelerated in the second quarter," the company says. "In turn, we believe inventories are creeping up and price declines have picked up steam," possibly impacting second-quarter results at both Circuit City and Best Buy.
Circuit City is especially vulnerable, the analysis says. "Circuit City is losing share in a weak environment, and we are forecasting a decline of 4% domestically in comparable-store sales. Company-specific risks include market share losses on the service business, weak real estate and low employee morale."
Deutsche Bank says it continues to rate Best Buy as a "buy," because it continues to gain market share, despite the risks of increased focus on consumer electronics from mass merchants such as Wal-Mart, which has made a big push into higher-end electronics.
Separately, Best Buy announced the opening of eight stores in Pueblo, Colo.; Las Vegas; York, Pa.; Chesterfield, Mich.; Buffalo, N.Y.; Lexington, S.C.; Meridian, Miss., and Perrysburg, Ohio.