Best Buy profits plunge on weak sales, restructuring costs
Best Buy's profits plummeted about 90 percent during its second fiscal quarter as weak sales and restructuring costs hit its bottom line.
The big box retailer's weak financial results come two days after co-founder Richard Schulze walked away from an offer to move forward with talks to take the company private.
Yesterday, Best Buy named French executive Hubert Joly as its new CEO, replacing former chief executive Brian Dunn, who resigned in April amid allegations of an inappropriate relationship with an employee.
Net earnings from continuing operations came in at just $12 million, compared to $150 million last year, and operating income slipped to $33 million, from $260 million last year. The massive decline in profits stemmed from $91 million in restructuring costs and a 3 percent dip in revenue, which came in at $10.5 billion.
Domestic sales of cameras, televisions and laptops fell, partially offset by growth in tablets, smartphones, appliances and e-readers. Soft consumer demand in China and Canada negatively affected Best Buy's international sales.
Best Buy is in the midst of a major restructuring that will shut down 50 stores in an attempt to cut $250 million in expenses during its 2013 fiscal year. By its 2015 fiscal year, Best Buy plans to have made $800 million in cost reductions.
The company is grappling with consumer "showrooming," the habit of using smartphones for online cost comparisons while shopping. It is opening 100 small-format Best Buy Mobile stores and is aiming to grow online U.S. sales 15 percent over the course of its 2013 fiscal year.
Best Buy said today it has suspended share repurchases for the remainder of its fiscal year and has reduced its annual earnings expectations. It will not provide more specific earnings guidance for fiscal 2013.
Investors took a dim view of Best Buy's results, sending the company's shares down almost 6 percent in morning trading on the New York Stock Exchange.