Best Buy quarterly results better than expected
Company reveals plan to offer 4,000 buyouts to employeesBest Buy on Tuesday reported better-than expected quarterly results and unveiled plans to offer buyouts and trim back store openings as consumers cut spending, sending shares up nearly 16%.
The top consumer electronics retailer has taken several steps to counter the U.S. recession and fend off increased competition from discounters such as Wal-Mart, which has stepped up its product offering and cut prices in the key holiday shopping season.
"We believe that there has been a dramatic and potentially long-lasting change in consumer behavior as people adjust to the new realities of the marketplace," Best Buy CEO Brad Anderson said.
Best Buy is offering buyout packages to its 4,000 corporate employees and plans to cut new store openings next year as capital spending falls about 50%. Net earnings fell to $52 million, or 13 cents a diluted share, for the third quarter that ended Nov. 29, from $228 million, or 53 cents a share, a year earlier.
Excluding impairment charges tied to a decline in the market price of the company's stake in joint venture partner Carphone Warehouse, Best Buy's profit came to 35 cents a share. Analysts had expected 24 cents a share, according to Reuters Estimates.
Revenue rose 16% to $11.5 billion, boosted by inclusion of Best Buy Europe.
Sales at stores open at least 14 months, or same-store sales, fell 5.3% overall. Same-store sales were off 6.3% in the U.S. but rose 0.3% internationally.
Best Buy said U.S. customer traffic declined, but its average sale rose as bigger-ticket items such as mobile phones and laptops accounted for more of revenue.
Gross margin improved to 24.9% of sales from 23.5%, aided by sales of higher-margin cell phones at Best Buy Europe.
Last month, Minneapolis-based Best Buy slashed its full-year earnings forecast, saying the meltdown in global financial markets had prompted "seismic" changes in consumer behavior.
Best Buy cut its annual profit forecast to $2.30 to $2.90 a share from a prior view of $3.25 to $3.40 a share. On Tuesday, it stood by that reduced forecast.
Fire sales at bankrupt rival Circuit City Stores, which is closing 155 U.S. stores are also expected to pressure Best Buy's results in coming months. Circuit City filed for Chapter 11 protection last month.
Shares rose $3.53 to $27 in early trading on the New York Stock Exchange.