Best Buy placed on credit watch

Standard & Poor's Ratings Services placed its 'BBB-' corporate credit rating and other ratings on Richfield, Minn.-based Best Buy Co. Inc. on CreditWatch with negative implications. This rating is one notch above the "junk" or speculative realm.

The CreditWatch placement comes on the heels of  Best Buy's lackluster fourth-quarter and full-year results, its planned closure of 50 U.S.-based big box stores, the opening of 100 U.S.-based small format stores in the U.S. The electronic big box giant also plans to cut $800 million in operating costs over the next five years, with $250 million occurring in the current fiscal year ending Jan. 31, 2013.

"We believe the restructuring of operations underscores the problems that Best Buy is having with its current business model," said Standard & Poor's credit analyst Jayne Ross.

Standard & Poor's expects to resolve the CreditWatch listing in the near term, after discussions with management about their business strategy, cost reduction and growth initiatives, and its implications for the company's financial risk profile, credit metrics and financial policies.

"Our analysis will focus on our assessment of the secular changes in the industry and Best Buy's ability to adapt its model to those changes," Ross said.

Best Buy shares traded down on the news as investors fear a "junk" rating is likely.

In the final hour of trading (April 4) shares (NYSE:BBY) were selling at $22.98, down 2.42%.