* Adj profit 3 cents/share vs Street view 12 cents
* U.S. same-store sales fall 4 percent
* Sees less steep decline in operating profit in 4th quarter
* Shares tumble 14 percent
By Dhanya Skariachan and Olivia Oran
Nov 20 Best Buy Co Inc shares fell to
their lowest level in a decade on Tuesday as the electronics
retailer reported a weaker-than-expected quarterly profit and
same-store sales fell for the ninth time in 10 quarters.
The shares tumbled 14 percent to $11.79 in morning trading,
highlighting the challenges the company's new chief executive
faces in trying to turn around the world's largest consumer
The news came just days before the unofficial start of the
holiday shopping season and amid a wide restructuring under CEO
Hubert Joly and a looming buyout proposal from founder Richard
"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 is a victim of aggressive competition from
online and discount rivals and what critics call a failure to
adapt to a changing retail environment.
Critics say Best Buy stores are hurting because they have
become showrooms for Amazon.com Inc and other online
retailers, as shoppers check out electronics like
high-definition TVs and then buy them elsewhere for less.
"Few people are going to be willing to pay $80 for a cable
in-store when they know they can buy an equivalent product
online for $5," said Rakesh Agrawal, principal analyst at San
Francisco-based consulting firm reDesign Mobile.
On a conference call, Best Buy executives said they expected
the retailer to benefit from its promise to match competitors'
prices on some items during the holiday shopping season, and
from additional training it gave workers at its stores.
Outgoing Chief Financial Officer Jim Muehlbauer tried to
reassure investors that things will get better in the
all-important holiday quarter.
"We do not expect fourth-quarter operating income to decline
at rates experienced in the third quarter," Muehlbauer said,
citing new products, better inventory management.
Some Best Buy investors say the company's weak results and
Joly's plan make them more willing to consider a buyout offer
Best Buy "certainly has a right to exist, but at a much
smaller scale," said Frank Lombardi III, a portfolio manager at
Cubic Asset Management in Boston, which has $400 million under
management. "I think the long-term strategy for them to operate
as a public company and for them to use my capital to execute a
strategy is ultimately flawed."
Schulze is expected to submit a final buyout proposal for
Best Buy in December after seeing how the company is performing
in the crucial holiday season, sources have told Reuters.
He is currently working with at least three private equity
firms to line up financing for a deal. Any new bid is likely to
come in below his initial proposed of $24 to $26 per share, made
in August. Best Buy's stock has tumbled since then.
Best Buy, which also faces cutthroat competition from the
likes of Wal-Mart Stores Inc and Apple Inc,
said its net loss was $13 million, or 4 cents a share, in the
third quarter, ended Nov.3, compared with a year-earlier profit
of $173 million, or 47 cents a share.
Excluding restructuring charges, the company earned 3 cents
a share, far below analysts' average estimate of 12 cents,
according to Thomson Reuters I/B/E/S.
Sales fell to $10.75 billion from $11.15 billion.
Sales at stores open at least 14 months fell 4.3 percent,
including a 4 percent decline at the company's 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
While demand was strong for mobile phones, appliances,
tablet computers and e-readers, there were few takers for
notebook computers, gaming products and televisions.
Same-store sales fell 5.2 percent at the company's
international unit, hurt by weak sales in Canada and China.