NEW YORK (AP) – Best Buy shoppers spent less than expected this spring, contributing to a rocky first quarter for the chain and disappointing Wall Street, but executives said the weak results don't mean Americans have less of an appetite for electronics.
The company's profit edged up 1 percent but fell far short of what analysts were expecting. Best Buy stock tumbled 6 percent.
Company executives pointed out Tuesday that the first quarter makes up just 10 percent of Best Buy's annual revenue and expressed confidence in Americans' demand for products such as phones and computers.
"While spending clearly rallied from low levels of 2009, our data paints a picture of a consumer coming out to spend, and spend well, during important events, but taking pauses in between," CEO Brian Dunn said in a call with analysts.
Strong areas for Best Buy included cell phones, driven by the launch of the Sprint HTC Evo 4G smartphone, plus notebook computers and appliances. Apple's iPad also stirred interest in tablet computers, with more of the devices debuting later this year.
But sales of televisions, video game products, music and movies were weaker. Best Buy actually sold more TVs but at lower prices, with prices for flat-screen sets coming down as the market matures.
Best Buy Co. said its net income rose to $155 million, or 36 cents per share, during the three months ended May 29, from $153 million, also roughly 36 cents per share, a year ago. Revenue rose almost 7 percent, to $10.79 billion from $10.1 billion.
Analysts polled by Thomson Reuters had expected earnings of 50 cents per share on higher revenue of $10.93 billion.
Best Buy also spent 12 percent more money itself, exacerbating the profit shortfall. The company added locations, including standalone mobile stores, renovated the home-theater and computer sections of its stores and spent more on technology and employees.
The company said it was making investments ahead of the busy back-to-school and holiday shopping seasons and said expenses should not rise as much over the rest of the year.
Revenue in stores open at least a year, a key indicator of a retailer's financial health, rose 2.8 percent. Best Buy has forecast that the measure will come in at 1 percent to 3 percent for the fiscal year.
Best Buy benefited when rival Circuit City closed last year, but it faces stepped-up competition from online stores and discount stores such as Wal-Mart.
Right now, it has about 41 percent of the market in consumer electronics, according to research firm IBISWorld. Best Buy said it estimates it gained about 1 percentage point during the three months ended April 30 compared with a year earlier.
While consumers are increasingly viewing gadgets like smartphones as necessities, spending on consumer electronics has been choppy lately. MasterCard's SpendingPulse, which measures spending in all forms, including cash, reported sales of consumer electronics fell 0.8 percent in May.
Wal-Mart Stores Inc. reported last month that revenue from electronics fell from a year ago. Large-panel TVs and laptops sold well, but sales of video games and consoles were weaker.
But Best Buy said it believes, based on back orders and expected new product launches, demand for consumer electronics will rise during the rest of the year.
The company, based in Minneapolis, held its full-year forecast steady – earnings of $3.45 to $3.60 per share on revenue of $52 billion to $53 billion. Analysts expect earnings of $3.52 on revenue of $52.63 billion.
Edward Jones analyst Matt Arnold said the guidance seemed reasonable.
"Right now, the consumer has to have a very strong reason to open up their wallet, and Christmas usually is, that's the big quarter," he said. "It's too early to change expectations, but you do have to be very nimble and able to dial back expenses if sales don't materialize."
Shares fell $2.45, or 6 percent, to $38.60 during midday trading. The stock has traded between $31.25 and $48.83 during the past 52 weeks.