UPDATE 2-Best Buy warns on profit; U.S. unit head to leave
* Sees fiscal Q3 results significantly below year ago
* U.S. unit president to leave at end of fiscal year
Oct 24 (Reuters) - Retailer Best Buy Co Inc on Wednesday warned earnings and same-store sales would fall for its fiscal third quarter, and said the head of its U.S. business will leave as it starts to restructure under a new chief executive.
Best Buy shares fell 6 percent in after-hours trading. The news came less than a month before the unofficial start of the biggest selling season of the year.
The company, the No. 1 U.S. electronics chain, said a number of senior managers will leave as it restructures to remove a layer of management. U.S. business president Mike Vitelli will leave at the end of the current fiscal year in early February. The executive vice president of U.S. operations will also depart.
The move is the first big structural change under new CEO Hubert Joly, who was brought in as the company grapples with shoppers who treat its stores like showrooms for cheaper online retailers.
At the same time, the company is waiting for its former CEO and largest shareholder, Richard Schulze, to decide whether he can put together a buyout bid.
Yet one analyst said the most troubling news of all was a decline in the company's gross margins, which suggests how aggressive it has become with promotions to lure customers.
``If they try to compete on price they are doomed. Their cost structure doesn't allow that,'' said Wedbush Securities analyst Michael Pachter. ``They have to figure out how to charge a higher price and make shopping in their stores a rewarding experience.''
Best Buy said it now expects earnings for the fiscal third quarter ending Nov. 3 to fall ``significantly below'' those of a year earlier, excluding one-time items, due to falling margins and declines at sales at established stores.
Analysts polled by Thomson Reuters I/B/E/S on average had expected earnings per share of 36 cents in the quarter. In the fiscal third quarter a year earlier it earned 47 cents per share on an adjusted basis.
``I think people were looking for more out of the third-quarter results given that we had some big product launches,'' said Morningstar analyst R.J. Hottovy. ``Even though it was toward the end of the quarter, you had the iPhone 5 out there.''
Best Buy shares fell to $15.90 in after-hours trading from a $16.92 close on the New York Stock Exchange. The company also said Wednesday that it would hold an investor day on Nov. 1 to discuss Joly's plans for the future.