Greenberg: The Real Story at Best Buy
To say I was dumbstruck a quarter ago when Best Buyraised guidance would be an understatement.
A few weeks earlier, on CNBC’s Strategy Session, I was laying out the reasons I thought the company couldn’t help but cut its full-year guidance.
A key point of my story at the time: A round of the company’s revenuecame from PCs and TVs, both of which were getting whacked.
Today, as part of its fiscal third-quarter report, the company axed this year’s guidance to a range of $3.20 to $3.40 a share, including a favorable contribution of 12 cents from share repurchases through the third quarter.
That’s lower than the $3.45 to $3.60 a share guidance the company set at the beginning of the year, and well below the $3.55 to $3.70 a share set a quarter ago.
But the real story is this: Online sales crumbled to year-over-year growth of 7 percent, down from 15 percent in the second quarter and 21 percent in the first quarter.
This suggests a structural change to online purchases at Amazon, price-war-happy Wal-Mart and anybody and everybody who sells online, as consumers armed with bar-code scanners on their phones and the ease of searching from their homes opt for price (no tax, free shipping) over the store.
And before you start saying, “But the gross margin was 25.1 percent, up from 24.5 percent a year earlier,” keep in mind: It’s down from 25.7 percent in the second quarter. (As my friends on Wall Street like to say: Every basis point counts.)
As one longtime watcher asks, “Is Best Buy becoming the Sears of consumer electronics retailing?”
My take: Maybe!
Questions? Comments? Write to HerbOnTheStreet@cnbc.com
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