Best Buy Co. Inc. (BBY), the top U.S. electronics retailer, Friday said quarterly profit rose 22 percent, but sales gains were driven by lower-margin products like MP3 players (search), DVD movies and laptop computers.

Best Buy also forecast first-quarter and fiscal year 2006 profit below many analysts estimates and its shares fell more than 3 percent.

Net profit rose to $572 million, or $1.69 a share, in the fourth quarter ended Feb. 26, from $469 million, or $1.40 a share, a year earlier.

The latest results included charges of up to $33 million to reflect changes in lease accounting and an allowance to cover customer returns.

The charges partly offset the effect of a $50 million, or 15 cents a share, tax benefit tied to the resolution of tax matters related to Best Buy's former Musicland subsidiary.

Excluding one-time items, earning were $1.55 a share. Best Buy had warned on March 3 that expanded promotions would result in a profit at the low end, or slightly below, its previous target of $1.56 to $1.66 a share.

As previously reported, total quarterly sales grew 9 percent to $9.2 billion.

The company also said it would speed up the overhaul of its stores.

To spur sales, Best Buy has embarked on a costly store make-over to target specific customer segments based on store location, while also selling services to outdo rivals like Circuit City Stores Inc. (CC) and discounter Wal-Mart Stores Inc. (WMT). Currently, 85 of the company's U.S. stores operate under the model.

Best Buy, which has about 830 stores, said it would open or convert 150 to 200 stores to the new model in fiscal year 2006.

Sales from stores open at least 14 months, or same-store sales rose 2.8 percent, missing Best Buy previous forecast of an increase at the low end of a 3 percent to 5 percent range, despite a pickup of sales in February.

Gross profit fell to 23.5 percent of revenue from 24.2 percent a year ago, due to promotions and sales of lower-margin items.

In the latest quarter Best Buy said its share of the $100 billion electronics industry rose to about 17 percent.

The company forecast earnings from continuing operations for the fiscal year ending Feb. 25, 2006, in a range of $2.95 to $3.10 a share, including an expected expense from stock-based compensation of 17 cents a share. Before the impact of stock-based compensation, Best Buy said it expects continuing operations to rise by 15 percent.

It said analysts on average had estimated fiscal year earnings of $3.31 a share, before stock-based compensation expenses and other accounting items that total 23 cents a share.

Best Buy forecast revenue would rise by about 11 percent to more than $30 billion for the year, with comparable-store sales seen up 4 percent to 5 percent.

It estimated earnings from continuing operations for the first fiscal quarter of 27 cents to 32 cents a share, including stock-based compensation expense of 5 cents a share. That compares to analysts' forecast of 38 cents a share, before stock-based compensation and accounting items totaling 5 cents a share, it said.

It said it sees first-quarter same-store sales rising by 8.3 percent.