Best Buy strengthens case for unlikely turnaround
Have the many skeptics about the electronic retailer's chances just been proved wrong?
By Abram Brown
Here's a sentence you might need to reread: Best Buy (BBY), which recently seemed as modern a business as the drive-in movie theater, is showing that its turnaround dreams are becoming a reality.
The latest thing going right at Best Buy? It's actually profitable. For the first time in a year, Best Buy edged into the black for the second quarter. The Richfield, Minn., company earned $266 million, 77 cents a share, up drastically from $12 million, 4 cents a share, a year ago. Core earnings, which tamped down a lot of the noise around the company's transition, were 32 cents a share, more than the 26 cents from a year earlier.
Revenue was just a bit lower, at $9.3 billion, compared to $9.34 billion a year later.
The quarter caught Wall Streeters looking grim-mouthed. Analysts predicted Best Buy would earn substantially less, just $38 million, or 12 cents a share, on $9.13 billion in sales. In response to the better-than-expected numbers, Best Buy shares spiked this morning by 11% to $33.95. If the gains hold, the stock will be at a two-and-a-half year high. And it'll continue to add to Best Buy's head-turning rally: shares have risen nearly 160% since January.
Behind the rally is new CEO Hubert Joly and his determination to cut costs and make the iconic big-box stores more profitable. For years, the cavernous stores seemed little more than showrooms for e-retailers like Amazon.com (AMZN) or eBay (EBAY), not to mention seeming nothing at all like the Apple's (AAPL) retail stores that quickly carved out a place in pop culture and shoppers' minds. To contend with these problems, Best Buy has instituted a price-match policy and opened more branded boutiques for manufacturers like Apple and Samsung.
Joly says the company has made "measurable progress" with several key gauges of a retailer's health since November, when he laid out his ideas in a Midtown Manhattan auditorium and called it Renew Blue. (Ha, get it?)
One of the metrics Joly mentioned was same-store sales, which excludes figures from newly opened or closed locations to give a better sense of a retailer's success. Best Buy's same-store sales decreased 0.6%, much lower than the 3.3% decline from a year earlier. As for the Web, where Best Buy knows it doesn't hold as much sway with shoppers, sales increased 10.5%. That's a positive sign for Best Buy's work on revamping its website.
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I will NEVER shop in your stores again.
I love Best Buy - Good for them - I have stopped buying off of Amazon and started to buy from Best Buy both in store and their web. Plus with their credit card and reward zone program you get 5% back in reward points and pay no shipping with no minimum amount to buy. Hope Best Buy does prove Wall Street wrong. The news is nothing but stories of failure and gloom and doom. Let's have some positive news and keep America working.
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