Electronics retailer Best Buy Co. Inc. (BBY) Tuesday reported a decline in its first-quarter profit, hurt mainly by restructuring charges. On an adjusted basis, the company's earnings were slightly lower year-over-year, but came in above analysts' estimates. The company also confirmed its adjusted earnings per share outlook for fiscal 2010.
Best Buy reported first-quarter net earnings attributable to the company of $153 million, or $0.36 per share, compared with $179 million, or $0.43 per share, last year.
The company said that restructuring charges impacted the net earnings by $25 million, or $0.06 per share. These charges arose from previously announced actions related to store operating model changes in the domestic segment and corporate restructuring in Best Buy Europe.
Excluding these charges, adjusted net earnings were $178 million, or $0.42 per share, slightly down from the previous-year quarter. Analysts polled by Thomson Reuters expected the company to report earnings of $0.34 per share for the quarter. Analysts' estimates typically exclude special items.
Revenues rose 12% to $10.10 billion from $8.99 billion in the prior-year quarter. Wall Street analysts were looking for revenues of $10.13 billion for the quarter.
In the preceding fourth quarter, the consumer electronics retailer, which is also known as the 'big blue box' because of the prominent design on Best Buy stores, had posted net income of $570 million, or $1.35 per share, on revenues of $14.72 billion.
According to the Richfield, Minnesota-based company, the first-quarter revenue growth reflected the inclusion of Best Buy Europe's revenue and gains from the net addition of 185 net new stores in the past 12 months. The revenue gains were partially offset by a comparable store sales decline of 6.2% and the unfavorable impact of foreign currency fluctuations. In the year-ago quarter, comparable store sales were up 3.7%.
The company had previously indicated that it anticipates comparable store sales declines to be greater during the fiscal first half of the year than the second half.
Commenting on the first-quarter results, Jim Muehlbauer, Best Buy's executive vice president of finance and chief financial officer, said, "Our first quarter results reflect strong execution of our strategy in a difficult consumer environment. Once again, our teams grew market share and improved the gross profit rate while maintaining a disciplined approach to expense management."
The company's domestic segment revenue for the first quarter was $7.5 billion, an increase of nearly 1% from the prior-year period. Growth from the net addition of 115 stores in the past 12 months was partially offset by a comparable store sales decline of 4.9%.
The company attributed the decrease in domestic comparable store sales to a reduction in customer traffic and an essentially flat average ticket, reflecting decreases in gaming, digital cameras, appliances and movies, partially offset by gains in notebook computers, mobile phones and repair services. The company noted that comparable store sales in flat-panel televisions were essentially flat versus the prior year as unit increases offset declines in the average selling price. These results were slightly ahead of the company's expectations for the quarter.
The company also reported revenues of $2.6 billion in the international segment, a 67% increase from last year, driven by the inclusion of revenue from Best Buy Europe as well as the net addition of 70 stores over the past 12 months. These gains were partially offset by the negative impact of foreign currency fluctuations and a comparable store sales decline of 13.9%.
Excluding the addition of Best Buy Europe and the negative impact of fluctuations in foreign currency exchange rates, the international segment's revenue declined approximately 9% year-over-year.
Canada reported a low-double-digit decline in comparable store sales as customer traffic slowed in the period due to continued macro economic weakness. The company also said that China operations, which are reported on a two-month lag, experienced a low-double-digit decrease in comparable store sales driven by continued weakness in the Chinese economy.
Among others in the sector, Wal-Mart Stores Inc. (WMT) is coming up as a strong competitor to Best Buy due to its pricing advantage. The retail monolith has generated first-quarter profit of $3.02 billion, or $0.77 per share, compared to $3.02 billion, or $0.76 per share, in the year-ago quarter, as stronger dollar weighed on its international sales. Quarterly net sales were $93.47 billion, down 0.6% from $94.04 billion a year earlier.
On May 19, Wal-Mart said that it is revamping its electronics departments at its 3,500 odd stores in the U.S. in order to capture the space left vacant by the exit of consumer electronics retailer Circuit City Stores, Inc. (CCTYQ.PK). In order to grab a major share of Circuit City's customers, Bentonville, Arkansas-based Wal-Mart is reportedly going to have a roomier and more interactive electronics displays with standalone interactive electronics displays. These may include individual sections for popular brands such as Nintendo Co. and Apple, Inc. (AAPL).
Video game and entertainment software retailer GameStop Corp. (GME) reported first-quarter net income of $70.43 million, or $0.42 per share, an increase from last year's income of $62.13 million, or $0.37 per share, boosted by strong sales of the Nintendo DSi handheld system, and sell-thru of new video games that bucked the economic slowdown. Total sales advanced 9.2% to $1.98 billion from $1.81 billion in the same quarter of last year.
Another general merchandise and food discount retailer Target Corp. (TGT) has witnessed a 13.4% drop in its first-quarter profit that totaled $522 million, or $0.69 per share, compared to $602 million, or $0.74 per share, in the prior-year quarter, hurt by the slowdown in consumer spending. Total revenues grew 0.2% to $14.83 billion from $14.80 billion in the previous year.
Looking ahead, Best Buy continues to expect fiscal 2010 earnings per share of $2.50 to $2.90, excluding restructuring charges. Street analysts are of the view that the company will earn $2.79 per share for the year.
"Given the limited visibility to consumer spending in the back half of the year, along with the fact that a majority of the company's earnings are derived from the holiday selling season, it's prudent to maintain our original guidance at this point. We remain focused on executing on our strategic priorities, growing our market share and continuing to invest for future growth opportunities," Muehlbauer added.
While releasing the fourth-quarter results, the company has projected fiscal 2010 revenues between $46.5 billion and $48.5 billion, with a comparable store sales change of flat to down 5%. The company's revenue outlook represents an average growth of 6% over fiscal 2009.
BBY is trading at $36.60, down $2.06, on a volume of 15.56 million shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.