2nd UPDATE: Best Buy 2Q Profit Down; Raises FY10 Views
15 Septembre 2009 - 8:04PM
Dow Jones News
Best Buy Inc.'s (BBY) fiscal second-quarter earnings fell a
bigger-than-expected 22% as such less-profitable products as
laptops and smaller televisions proved popular and its
international business swung to a loss.
The largest U.S. consumer-electronics retailer by sales,
however, said it continues to capture market share since Circuit
City Stores Inc. (CCTYQ) went out of business in March. Shopper
traffic improved slightly too, providing hope for the holiday
season.
Best Buy raised its fiscal-year outlook and said sales improved
as the quarter progressed. Its strongest categories were those
where customers need the most help and where Best Buy's employees
and services, such as Geek Squad, can distinguish the retailer from
discounters, Chief Executive Brian Dunn said during a conference
call.
"I'm increasingly optimistic about the second half of the year,"
he said, adding that the company has gained more U.S. market share
than any competitor since Circuit City's demise.
Best Buy estimated it gained 2.7 percentage points of market
share in the July 31-ended calendar quarter, including gains in
mobile phones, flat-panel TV sets, notebook computers and digital
imaging, which includes cameras and camcorders. It operates 1,036
Best Buy stores and 40 Best Buy Mobile stores in the U.S.
Shares fell $2.02, or 5.0%, to $38.39 on the quarterly profit
miss, but the stock through Monday's close was also up 44% this
year. Some industry analysts fretted that Best Buy's efforts to
gain market share will continue to come at a cost to profits.
"We are concerned that more aggressive price promotions and
underlying deteriorating trends in the TV category are increasingly
weighing upon profits at BBY," said Oppenheimer analyst Brian
Nagel.
Still, Best Buy now expects full-year earnings of $2.70 to $3 a
share on revenue of $48 billion to $49 billion, with same-store
sales off as much as 2%. The company in March predicted earnings of
$2.50 to $2.90 a share, revenue of $46.5 billion to $48.5 billion
and a same-store sales decline of up to 5%.
Best Buy, Wal-Mart Stores Inc. (WMT) and online players have
been scrambling to capture the roughly $11 billion in annual sales
up for grabs following Circuit City's closing of nearly 600 U.S.
stores.
Best Buy said retail pricing isn't any more competitive than
expected, but executives acknowledged that the launch of Apple
Inc.'s (AAPL) new iPhone and several promotions aimed at boosting
sales in appliances and digital cameras hurt profitability.
Still, Dunn pledged a long-term benefit to Best Buy's top and
bottom lines. "We have a track record of acquiring and retaining
market share," he said.
Profit in the Aug. 29-ended second quarter fell to $158 million,
or 37 cents a share, from $202 million, or 48 cents a share, a year
earlier.
Revenue increased 12% to $11.02 billion, helped by the inclusion
of Best Buy Europe, its year-old joint venture with the U.K.'s
Carphone Warehouse Group PLC (CPW.LN). Same-store sales, or sales
at stores open at least 14 months and including Internet sales,
fell a smaller-than-expected 3.9%.
Overall, analysts surveyed by Thomson Reuters were looking for
earnings of 42 cents a share on revenue of $10.78 billion.
U.S. same-store sales fell 3.1%, hurt by a plunge in videogames,
music and movies, and by ongoing price declines for TVs. Appliance
sales also remained weak, falling 10.1%. Sales of computers, mobile
phones and other home-office products rose 7.3%. Laptops posted a
double-digit percentage increase, and the popularity of net books
helped boost sales of accessories such as optical drives, the
company said.
Higher expenses than a year earlier for international operations
generated an operating loss in that segment, but international
revenue soared 65% on the addition of Best Buy Europe and new
stores. International same-store sales dropped 8.3%.
-By Mary Ellen Lloyd, Dow Jones Newswires; 704-948-9145;
maryellen.lloyd@dowjones.com
(Tess Stynes contributed to this article.)
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