Best Buy Woes Continue as Earnings Fall Short
Best Buy eported quarterly earnings Tuesday that badly missed even the lowered expectations for profit, though revenue was a shade better than estimates.
The world's largest consumer electronic chain saw shares drop 8 ercent in trading following the news. (Click here to get real-time quotes for Best Buy.)
Best Buy said its third-quarter net loss was $13 million, or 4 cents a share, compared with year-earlier net earnings of $173 million, or 47 cents a share.
Excluding restructuring charges, the company earned 3 cents a share and its revenue fell to $10.75 billion uring the quarter from $11.145 billion the previous year.
Wall Street had expected Best Buy to report earnings excluding items of 12 cents a share on $10.73 billion in revenue, according to Thomson Reuters consensus estimates.
The news came just days before the unofficial start of the holiday season, and amid a wide organizational restructuring under new CEO Hubert Joly, and a looming buyout proposal by founder Richard Schulze.
"The results we are reporting today only strengthen our sense of urgency and purpose," said Joly, who took the helm of Best Buy in September.
The company's shares have been taking a pounding since it announced on Oct. 24 that its earnings would be "significantly below the prior-year period" amid continued declines in same-store sales.
Critics say Best Buy stores are hurting because they have become showrooms for Amazon.com and other online retailers as shoppers check out electronics like high-definition TVs and then buy them elsewhere for less.
The company also lowered guidance for free cash flow to between $850 million and $1.05 billion for 2013, against previous estimates of $1.25 billion to $1.5 billion.
Best Buy also reported a decline in same-store sales — its ninth in the last 10 quarters — highlighting one of the challenges for its new chief executive.
Sales at stores open at least 14 months fell 4.3 percent in the third quarter ended Nov.3, including a 4 percent decline at its U.S. unit.
Best Buy's domestic business suffered from higher selling, general and administrative costs, falling sales and customers' holding back on some purchases in anticipation of major product launches.
While demand was strong for mobile phones, appliances, tablet computers and e-readers, there were few takers for notebook computers, gaming products and televisions.
—Reuters contributed to this report.
CORRECTION: An earlier version of this article reported that Best Buy's earnings excluding items were 4 cents per share. In fact, the company's earnings excluding items were 3 cents a share.