Best Buy Profits Despite Still-Sliding Sales
Best Buy’s second-quarter profits came in better than both analysts and the Richfield-based company expected, but still-lagging sales and revenue dimmed its outlook for the year’s second half.
Sharon McCollam, Best Buy’s chief financial officer and executive vice president, forecasted single-digit declines in sales for both the third and fourth quarters in a statement released Tuesday announcing second quarter results.
Best Buy’s reported second-quarter revenue came in short of analysts’ expectations at $8.89 billion, a 4 percent drop from the $9.2 billion earned in last year’s second quarter, which ended August 3. Best Buy said its net income was $146 million, down from $266 million in the second quarter of 2013, and its earnings per share were 42 cents, down from 78 cents last year.
The company—the world’s largest seller of electronics—reported a 2.7 percent decline in same-store sales, a decrease of 0.5 percent more than analysts forecasted for the quarter. Domestic same-store sales fell 2 percent this period and 6.7 percent in its international segment, something company leaders attributed to trends extending beyond Best Buy
“Industry-wide sales are continuing to decline in many of the consumer electronics categories in which we compete,” McCollam said in a statement. “We are also seeing ongoing softness in the mobile phone category ahead of highly-anticipated new product launches.”
Among the anticipated product rollouts is an expected Sept. 9 announcement by Apple unveiling its iPhone 6.
Tuesday’s results weren’t completely gloomy: This year’s second-quarter adjusted profit, which grew to 44 cents per share from 32 cents, exceeded the 31 cents that analysts polled by Thomson Reuters were expecting.
Best Buy CEO and President Hubert Joly, meanwhile, said traffic to Best Buy’s brick and mortar stores continued to decline while in-store conversion and online traffic increased. He cited cost reduction strategies as the driving force behind this quarter’s lowerprofits.
The company’s “Renew Blue” turnaround strategy is aimed at growing its online business and leveraging multi-channel capabilities, Joly said in Tuesday’s statement. He added that Best Buy’s ship-from-store and digital marketing helped drive a 22 percent increase in domestic online sales.
“We continued to see a shift in consumer behavior: consumers are increasingly researching and buying online,” Joly said.
Shares of Best Buy’s stock dropped more than 5 percent to about $30.40 as of 10:15 a.m. during Tuesday morning trading. That’s a 25 percent decline from the company’s share price at the beginning of the year and a drop of about 15 percent from last year.