By Dhanya Skariachan
Aug 20 Best Buy Co Inc reported its
first quarterly profit in a year after keeping a tight lid on
costs, further confirming that Chief Executive Officer Hubert
Joly's turnaround plan for the world's largest consumer
electronics chain is working.
The news, which boosted Best Buy shares as much as 13
percent to three times their price at the end of 2012, came a
year after the restructuring expert took the helm of the
Under Joly, Best Buy has lowered costs by removing layers of
management, cutting jobs and closing some stores. It has also
announced plans to shed noncore assets such as its stake in a
European joint venture with Carphone Warehouse.
The efforts have boosted Best Buy's bottom line even as the
company tries to reverse sales declines and fend off cutthroat
competition from the likes of Wal-Mart Stores Inc and
Joly told Reuters he saw more room to cut costs, but
stressed that he would focus on saving money on goods sold
rather than on reducing headcount.
The company has been matching rivals' online prices and
dedicating more space to faster-growing products such as
smartphones and tablets.
Best Buy is doing "some degree" of same-day delivery in some
U.S. markets, Joly said. On Tuesday, it said it planned to
extend its "ship from store" test to more than 200 locations in
time for the holiday season.
The company has also invested in employee training, store
revamps and its website.
Wall Street has cheered Best Buy's decision to let vendors
such as Samsung Electronics and Microsoft Corp
run their own boutiques within the retailer's stores,
saying this has helped solve such problems as excess square
footage, customer service and pricing pressures.
While Best Buy is in talks with other vendors, Joly said he
did not expect the stores to become just a collection of
Net earnings rose to $266 million, or 77 cents a share in
the second quarter ended Aug. 4 from $12 million, or 4 cents a
share, a year earlier. Excluding a host of items, including
certain legal settlements and a gain on the sale of Best Buy
Europe, the company earned 32 cents a share, while analysts on
average expected 12 cents.
"Best Buy's much better-than-expected second-quarter results
further highlight the continued progress management has made
under its Renew Blue turnaround plan," BB&T Capital Markets
analyst Anthony Chukumba said. "We find the results even more
stunning given the myriad store disruptions and investments."
Best Buy's efforts to become more price-competitive and
product warranty-related costs squeezed gross margin, but the
30-basis-point decline was less steep than what many on Wall
Sales fell 0.4 percent to $9.30 billion, but topped the
analysts' average estimate of $9.13 billion, according to
Thomson Reuters I/B/E/S. Sales at stores open at least 14 months
fell 0.6 percent, including a 0.4 decline domestically.
The company attributed the lower domestic same-store sales
to "short-term disruptions," including the rollout of the
Samsung and Microsoft Windows boutiques.
"The Windows stores-within-the-stores take several days to
install," Best Buy spokesman Matt Furman said.
Best Buy shares were up 9.3 percent at $33.59 in afternoon
trading after rising as high as $34.65 earlier in the day.