You are correct. Our firm was involved in a lawsuit against Best Buy and discovery revealed that some stores' entire profit margin was a result of the extended warranties they sell. But for these warranties those stores would would have been in the red.
Thank the new bankruptcy laws for Best Buy's problems. Because it is true that they make all their money from extended warrenties and financing, they have been hurt by marginal consumers thinking twice before going into long term debt for toys. Best Buy needs broke people who need instant gratification, for them to succeed in straping them with a high interest loan for that 50" HDTV that they cant afford, but would have otherwise just defaulted on with no penalties. Best Buy would get the write off on the debt as well.
It's been my experience that once a store starts pushing warranty extensions and the like, they are in financial trouble ie: Montgomery Wards.
Way back when I just starting in IT, I worked as a service tech at a "Beast" Buy. They did not care on whit on repairing things just on getting the warrantee and selling installs of software for $30. I was glad when I left.