Best Buy's turnaround plan shows promise
Better-than-expected results defied the naysayers. And with founder Schulze no longer a buyout player, that strategy is the retailer's best hope.
The Richfield, Minn.-based electronics retailer reported a net loss of $409 million, or $1.21 per share, compared with a year-ago loss of $1.81 billion, or $5.17 per share. Revenue rose 0.2% to $16.71 billion. Excluding one-time items, profit was $1.64 per share, beating the $1.54 average forecast of Wall Street. Best Buy's sales were better than the $16.34 billion consensus forecast.
Under Joly, Best Buy has slashed inventory levels and increased employee training as competition from rivals such as Amazon.com (AMZN) continues to intensify. The big-box store also recently announced plans to cut 400 workers from its headquarters. Still, even under the most optimistic scenarios, the chain has a tough road ahead.
Gross profit rate fell 10 basis points as Best Buy began matching prices of rivals to prevent "showrooming." That's the practice of shoppers looking at merchandise at retailers' bricks-and-mortar stores only to make their purchases at online sites that offer a lower price. Of course, Amazon -- a prime beneficiary of showrooming -- has more flexibility to cut prices further than Best Buy because it doesn't have the costs of physical stores.
The chain's improving fortunes, ironically, may be bad news for Schulze, who was unable to get financing to take Best Buy private. According to Reuters, Best Buy also turned down an offer by Schulze and two private equity partners to make a $1 billion minority investment. It remains unclear what steps Schulze will take next.
Best Buy has no choice now but to proceed with Joly's turnaround strategy because it didn't receive a formal acquisition offer from Schulze by a deadline the company had set.
--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
Copyright © 2014 Microsoft. All rights reserved.
[BRIEFING.COM] The S&P 500 has extended its gain to 0.6% with the health care sector (+1.0%) remaining ahead of the other nine groups.
Unlike the health care space, all of the remaining countercyclical sectors trail the broader market. The telecom services sector (+0.1%) continues holding a slim gain with Verizon (VZ 50.83, +0.13) up 0.2% in reaction to its earnings beat, while consumer staples (-0.2%) and utilities (-0.02%) hover in the red.
Notably, the staples ... More
More Market News
Pipeline owners are making big profits on oil coming from North Dakota's Bakken fields. But a lot of natural gas continues to be flared due to low prices.
MUST-SEE ON MSN
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'