Best Buy’s Profit Plummets; Joly and Schulze Plan Meeting
Best Buy Company, Inc.—which warned late last month that it expected its third-quarter profits to be “significantly lower” than last year’s—on Tuesday confirmed that its prediction was accurate.
The Richfield-based electronics retailer reported a net loss of $13 million, or 4 cents per share, from continuing operations for the quarter that ended November 3. That’s compared to net earnings of $173 million, or 47 cents per share, for the same period a year ago.
Excluding restructuring charges, the company’s net loss totaled $10 million, or 3 cents per share—falling significantly short of the 12 cents that analysts polled by Thomson Reuters were expecting.
Revenue for the quarter totaled $10.8 billion, down about 3.5 percent from $11.1 billion last year. Sales at stores open for at least a year—a key measure of a retailer’s health—slid 4.3 percent; the company had previously predicted a same-store sales decline of between 3 and 5 percent.
“In line with trends experienced over the last three years, Best Buy’s third-quarter financial performance was clearly unsatisfactory,” President and CEO Hubert Joly said in a statement.
Joly pointed out that Best Buy, at a recent investor meeting, unveiled a set of priorities for turning around the company. Joly’s priorities, dubbed “Renew Blue,” call for the company to “stabilize and then begin increasing” same-store sales, and “achieve over time” an operating margin of between 5 and 6 percent and a 13 to 15 percent return on invested capital.
Best Buy’s third-quarter results “only strengthen our sense of urgency and purpose,” Joly said Tuesday.
Best Buy’s dismal financial results come as the company gears up for the all-important holiday season, and as founder Richard Schulze is preparing a takeover bid.
Schulze is reportedly scheduled to meet this week with Best Buy’s new CEO for a rare discussion about how to revive the struggling retailer.
The Star Tribune, citing unnamed sources, reported that Schulze and CEO Hubert Joly have previously crossed paths, but this week’s meeting will provide the first real opportunity for the two to share their perspectives with one another in a substantial way. Top members of Schulze’s buyout team—former CEO Brad Anderson and former president Al Lenzmeier—are also expected to attend, a source told the Minneapolis newspaper.
Schulze, who initially indicated that his offer would be somewhere between $24 and $26 a share, doesn’t want to overpay for the company and would need to borrow billions to finance the deal, a source told the Star Tribune, adding that Schulze has delayed his bid to see how holiday sales affect Best Buy’s stock price.
The company’s stock price was trading down nearly 13 percent early Tuesday afternoon at $11.98 on the heels of the company’s third-quarter earnings report.
To learn more about the planned meeting between Schulze and Joly, read the full Star Tribune story here.
In a separate report, the Star Tribune recently described Best Buy as “the lost empire” and asked whether Schulze will be able to revive the struggling company. To read that story, which includes a significant amount of Best Buy’s history, click here.