Shares of Best Buy Company’s stock climbed Tuesday after the company reported an increase in second-quarter earnings and said that its turnaround plan is working.
The Richfield-based company said that net earnings for the quarter that ended August 3 totaled $266 million, or $0.77 cents per share—up dramatically from $12 million, or $0.04 per share, during the same period a year ago.
Adjusted earnings—which exclude certain one-time items—totaled $0.32 per share, far exceeding the $0.12 that analysts polled by Thomson Reuters were expecting. Among the items excluded from adjusted earnings were effects of the divestiture of its European business and $30 million in legal settlements from a lawsuit against LCD panel manufacturers.
Hubert Joly, who took the reins as president and CEO roughly a year ago, has cited as key goals in the company’s “Renew Blue” turnaround plan the ability to address falling same-store sales and declining operating margins. (Same-store sales comprise revenue from stores that have been open at least 14 months and serve as an industry barometer.)
He said in a Tuesday statement that the resolution of those two problems have become the company’s “rallying cry,” and work is in place to address them. “While we are clear there is much more work ahead, we have made measurable progress since we unveiled Renew Blue last year, including near-flat comparable store sales, substantive cost takeouts, and better-than-expected earnings in the past three consecutive quarters.”
Second-quarter revenue totaled $9.3 billion, down slightly from $9.34 billion during the same period a year ago. The company said same-store sales slid 0.6 percent; that marks an improvement from the 3.3 percent drop experienced during the second quarter of last year.
Domestic same-store sales slid 0.4 percent, but Joly chalked up the decline to “short-term disruptions” caused in part by the rollout of Best Buy’s new store-within-a-store concept, which includes partnerships with Samsung and Microsoft Windows. Those additions are “enriching our retail customer experience,” Joly said.
The company is continuing to invest in its website, and it has been matching competitors’ prices. It said that domestic sales from websites that have been operating for at least 14 months climbed 10.5 percent to $477 million, due to “increased traffic and higher average order value.”
Meanwhile, Best Buy cut another $65 million in annualized costs. Over the last nine months, the company has cut expenses by $390 million, and it has a target of reducing costs by $725 million.
After plummeting about 50 percent in 2012, Best Buy’s stock has been on a tear this year, as several analysts have suggested Joly’s turnaround plan is taking hold. Shares of the company’s stock were trading up more than 10 percent late Tuesday morning at $33.83. That marks a two-year high.
BB&T Capital Markets analyst Anthony Chukumba said that “Best Buy’s much better-than-expected second-quarter results further highlight the continued progress management has made under its Renew Blue turnaround plan,” according to a Reuters report. Chukumba reportedly said that Best Buy’s performance is “even more stunning given the myriad store disruptions and investments.”
Best Buy's strong second quarter comes after the company swung to a loss in the first quarter as revenue declined nearly 10 percent.
Best Buy is Minnesota’s third-largest public company based on revenue, which totaled $49.6 billion for the fiscal year that ended February 2.