Best Buy Co. Inc.’s turnaround gained speed in its August-October fiscal quarter, though its shares fell on a warning about competitive pressure during the year-end shopping season.
Bolstered by the introduction of several popular new electronics items and operational changes, Best Buy experienced positive growth in comparable stores, a key measure of retail performance, for the first time in three years.
Chief Financial Officer Sharon McCollam warned in a statement that Best Buy’s efforts to keep up with competitors’ prices during a year-end shopping season they expect to be “more promotional” could produce “a negative impact on our gross margin.” That sent the company’s stock, one of the best performers in the S&P 500 this year, lower. Best Buy stock ended down $4.78, at $38.78.
But Best Buy CEO Hubert Joly was almost combative about the competitive environment his company faces in the just-starting year-end shopping season.
“We’re in this to play to win,” Joly said in a conference call with Wall Street analysts. “Best Buy is back. We will not be shy about investing in winning the (year-end shopping) season.”
Best Buy said it earned $54 million for the three months ended Nov. 2. The profit amounted to 16 cents per share, above analysts’ consensus forecast of 12 cents. A year ago, Best Buy reported a loss of $10 million, or 3 cents a share, in the same period.
Comparable sales growth, or those at Best Buy’s U.S. stores open for at least a year, rose 1.7 percent. Analysts were expecting a gain of 0.8 percent. A year ago, its same-store sales declined about 4 percent in the same period. The last time Best Buy experienced comparable sales growth was in the May-July quarter in 2010, when it saw a 0.7 percent jump.
Revenue at the Richfield, Minn.-based retailer was $9.36 billion, down marginally from $9.38 billion a year ago. The company has been experiencing declines in sales since 2009, though they have tended to be bigger drops than seen in the most recent period.
In an interview, Joly said the company’s efforts to differentiate itself from other electronics sellers and online competitors are paying off.
“We’re very pleased with the quarter. Positive comp sales of 1.7 percent is great progress, better than expected,” Joly said. “Online growth of 15 percent is very meaningful. We took out more than $500 million in (operating) costs. That’s very meaningful, too.”
Best Buy’s performance was also shaped by timely releases of new smartphones from major manufacturers like Apple Inc. and Samsung Electronics Co.
Like other retailers, Best Buy tends to experience its biggest sales and profits in the November-January quarter, when consumers shop for the year-end holidays.