Best Buy: Profits, Stock Price Climb; 2K Layoffs Planned
Best Buy’s stock climbed about 7 percent Thursday morning after it reported a return to a quarterly profit on cost-cutting and strong online sales; however, its stock remains down more than 30 percent from the start of the year.
The Richfield-based electronics retailer announced that net earnings for the fourth quarter, which ended February 1, totaled $293 million, or $0.83 per share, up from a loss of $409 million, or $1.21 per share, during the same period the previous year. Earnings from continued operations were $1.24 per share, $0.23 higher than what analysts polled by Thomson Reuters had expected. Analysts’ expectations were lowered after Best Buy’s January announcement about weak holiday sales and light in-store traffic.
“The fourth quarter was an environment of declining retail traffic, intense promotion, fewer holiday shopping days, and severe weather,” President and CEO Hubert Joly said in a statement. “In the face of these unusual circumstances, our strategy to be price-competitive and provide an improved customer experience resulted in market share gains in a weaker-than-expected consumer electronics market.”
Revenue totaled $14.47 billion, down 3 percent from $14.92 billion in the fourth quarter of the previous year. Fourth-quarter revenue fell short of analysts’ projections of $14.66 billion.
While its same-store sales, which includes stores open for at least a year, dropped 1.2 percent from last year, its online sales increased by 26 percent, after growing 11 percent during the same period last year, to $1.57 billion.
Joly said “substantial cost savings” helped offset the poor holiday sales numbers and that the company exceeded its cost-cutting goal of $725 million by $40 million.
Speaking of cost-cutting, the New York Post reported Wednesday that Best Buy plans to lay off about 2,000 mid-level managers nationwide. The newspaper said that about 500 employees were notified of the cuts last week and others are expected to hear next week.
Best Buy cut 400 jobs in Minnesota about this time a year ago and cut 950 jobs in Canada in January.
Looking forward, Best Buy said the consumer electronics market will continue to struggle in 2014 and Chief Financial Officer Sharon McCollam said that changes in total company revenue and same-store sales will “remain slightly negative” for the first half of the year.
Shares of Best Buy’s stock were trading up about 6.6 percent at $27.5 per share during Thursday morning.