Best Buy US Sales Flat, Cash Flow Pressured
Best Buy on Friday slashed its expectations for 2013 free cash flow after it had to pay for inventory earlier than expected during a critical time for the world's largest electronics chain.
The company, which is in the midst of a restructuring and faces a looming buyout proposal by its founder, also posted flat sales at its U.S. division for the holiday season.
Shares of Best Buy fell 2.4 percent to $11.92 in premarket trading.
Revenue slipped 0.4 percent to $12.8 billion in the nine weeks ended Jan. 5. Sales at stores open at least 14 months were flat in the United States and fell 6.4 percent internationally on declines in Canada and China.
The company now expects free cash flow of about $500 million for the year ending on Feb. 2, down from a November forecast that called for a range of $850 million to $1.05 billion.
While comparable-store sales, gross margin, earnings and inventory levels were in line with the company's expectations, Best Buy now expects fiscal 2013 accounts payable as a percentage of inventories to be lower than those of the previous year. It previously said they would be consistent with those of the prior year.
Best Buy said it had received inventory earlier than expected and therefore had to make payments earlier. It also saw a shift in sales mix to higher-velocity merchandise categories that carry shorter payment terms.
In its fourth holiday season after the bankruptcy of archrival Circuit City, Best Buy faced cutthroat competition from the likes of Wal-Mart Stores and Amazon.com.
Best Buy said same-store sales had risen in the mobile phone, tablet/e-reader and appliance categories, but declined in entertainment, televisions and computing.