Best Buy fortunes decline as profits haemorrhage 90%
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The US electronics giant announced an earnings landslide of $12 million in the three months to August 4 – compared to $150m a year ago – as demand for TVs and notebooks slip.
Revenues fell 3% to $10.5bn, as did gross margin by 110bps to 24.3% but profits also stumbled a massive 91% in the summer quarter.
Best Buy’s sales fell 3.2%, while comparative sales in US stores fell 1.6% due to declines in demand for digital imaging, TV and notebooks.
Best Buy, the US biggest electronics retailer, has 1400 stores.
However, comp sales showed an improvement on the -3.7% dip recorded the prior quarter and BB noted “improved sequential sales and stable domestic market share” in a company statement.
The big box retailer did however enjoy online revenue growth of 14%.
Tablets and mobile phones were the retailer’s saving grace, as were appliances and eReaders.
International sales, which includes operations in Canada, slumped 8.2% due to anaemic consumer spending in China and increased competition in Europe.
Earlier in the week, Hubert Joly was announced as Best Buy’s new CEO in the hope to turnaround the retailer who is struggling in the marketplace dominated by e-tailers eBay and Amazon.
Joly was hailed as having “expertise in turnaround and growth across the media, technology and service sectors” but has no prior retail experience and is due to begin the role next month.
The largest retailer in the US has chopped its earnings expectations, blamed on “lowered expectations for industry wide sales and the uncertainty associated with several key product launches expected in the second half of fiscal 2013.”
The company also suspended earnings guidance Best Buy, who has recently been subject to a takeover bid by its founder Richard Schulze who is offering $24-26 per share, pushing the value of the company to $8.5bn-9bn.
However, Best Buy’s board failed to reach an agreement with Schulze to allow him to review the company’s books before any transaction takes place, reports the Wall Street Journal.
The company also said the majority of the company’s annual earnings will occur in the second half of the year and expects an annual free cash flow of $1.25 billion to $1.5 billion.