You are currently viewing the printable version of this article, to return to the normal page, please click here.

Best Buy 2nd quarter profit drops 90%

- Associated Press - Tuesday, August 21, 2012

NEW YORK — The news just keeps getting worse at Best Buy each day.

To top off an already eventful several days for the nation's largest consumer electronics retailer, Best Buy Co. Inc. withdrew its full-year earnings guidance Tuesday after reporting a 90 percent drop in profits during the second quarter, dragged down by restructuring charges and weak sales.

The poor report comes a day after Best Buy named Hubert Joly, former CEO of the Carlson travel company and turnaround expert, as its new CEO and president. It was expected that Best Buy would pick someone with retail experience, and Wall Street didn't respond well, sending Best Buy shares fell 10 percent.

And before that, the board and Richard Schulze over the weekend waged a public fight over the co-founder and former chairman's plan to take the company private.

Best Buy has been engulfed in mounting controversy since April when former CEO Brian Dunn resigned amid a company investigation into an "improper relationship" with a 29-year-old female employee. Mr. Schulze resigned as chairman a month later after the probe found that he knew about the relationship and failed to alert the board or human resources.

The series of bad news that has followed comes as Best Buy fights to reverse a decline in its business due to a weak global economy and consumers' changing shopping habits. Best Buy's stores are becoming unprofitable as customers increasingly use them to browse for electronics, then buy them cheaper online or elsewhere.

On top of that, shoppers are no longer snapping up big TVs and computers at a fast clip like they used to, instead opting for smaller gadgets such as cellphones and tablets.

In fact, during the latest quarter, U.S. sales growth in tablets, mobile phones, appliances and e-readers helped offset declines in gaming, digital imaging, televisions and notebook computers. Best Buy said the international business was dragged down by lower revenue in China, Canada and increased competition in Europe.

Overall, Best Buy earned $12 million, or 4 cents per share, in the quarter ended Aug. 4. That compares with $128 million, or 34 cents per share. Revenue declined nearly 3 percent to $10.55 billion. Adjusted earnings were 20 cents per share, missing the 31 cents per share on revenue of $10.65 billion analysts had expected.

Revenue at stores open at least 14 months fell 3.2 percent for the entire business, including a 1.6 percent drop in its domestic business and an 8.2 percent decline in its international division. Analysts had expected a 2.6 percent decline for the total business.

Brian Sozzi, chief equities analyst for research firm NBG Productions, described the latest quarter's results as "ugly." He said that Best Buy management needs to turn around things quickly.

"Every day, the [business] model is changing, and it goes against Best Buy," he said.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.