Best Buy downgraded to neutral at Cowen on slowing product cycles

NEW YORK, Jan 08, 2008 (Thomson Financial via COMTEX) -- BBY | news | PowerRating | PR Charts -- Best Buy Co. Tuesday was downgraded to neutral from outperform by Cowen and Co., which said that product cycles for large items were slowing, which could slow sales while costs per square foot remained relatively steady.

Retailers of consumer electronics can experience faster growth than retailers in other sectors, provided there are strong products to drive sales, Cowen said in a note to clients.

"Now that several of the larger product cycles (TVs and computers) are beginning to wane, we believe that the opportunity for material upside to estimates has diminished," Cowen said.

Cowen added that while price points in established product categories "inevitably" fall rapidly, the cost per square foot of doing business "stays relatively fixed."

Cowen's past enthusiasm for Best Buy was driven by the convergence of strong product cycles, as well as the company's position as the "leading beneficiary" of the cycles because of its market share.

While the firm said that it remained positive on the company's ability to take share in key categories, a lack of "compelling" products in the near future would limit growth.

"While we expect the continued secular growth in [fiscal 2009], that growth should moderate from [fiscal 2008] levels, Cowen said.

Shares of Best Buy were up 3 cents at $47.17. Ryan Vlastelica rv/jw

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