At Best Buy, Sales Down but Profits Better Than Expected

The word was mixed from Best Buy headquarters in Richfield Tuesday as the world's biggest electronics retailer announced earnings for its first fiscal quarter.

Reuters reported the bad news/good news story:

Best Buy Co Inc reported weak quarterly sales on Tuesday and warned that a slew of investments to entice shoppers could squeeze profits in the near term.

The news overshadowed its better-than-expected first-quarter profit and sent shares of the world's largest consumer electronics chain down 4 percent in premarket trading.

Fox Business quoted Best Buy CEO Hubert Joly:

“This was the result of the Super Bowl shifting into last year’s fourth quarter as well as our decision to reduce sales in certain non-core businesses,” Best Buy CEO Hubert Joly said in a statement. “Excluding these impacts, domestic comparable store sales were flat for the quarter despite no new major product launches and late deliveries in the smartphone category.”

An analyst cited by Bloomberg exuded pessimism:

“I don’t think revenue will ever rise unless they buy it with discounting prices,” Michael Pachter, an analyst at Wedbush Securities in Los Angeles, said in an e-mail May 3. He rates the shares underperform, the equivalent of a sell.

CNN Money found a sunnier outlook on Best Buy's situation:

Despite the sales decline, Brian Sozzi, chief equities strategist at Belus Capital Advisors, said he's not discouraged by the report.

"If you peer deep into the soul of Best Buy's performance, it should reaffirm the very reason the stock has zoomed in 2013," he wrote in a note to clients Tuesday. "That reason: an operational overhaul that is both removing oodles of wasteful processes and repositioning the company for relevance in a competitive industry."

And Forbes chided investors in it for the short haul:

Investors expressed their unhappiness with Best Buy’s progress by sinking the stock by 2.7% to $26.10 in pre-market trading.

Their actions reflect a particularly distressing short-term mentality (egads, a loss!) on the part of Best Buy shareholders, who have been richly rewarded so far this year with a 126% rise in share price through yesterday, and an alarming disconnect with what else has happened this year in the retail world. The absolute blow-up at J.C. Penney–stock down down 4.5% in the face of a roaring market, empty stores and a sacked wunderkind CEO–should reinforce something. That a period of discomfort almost always follows a new CEO’s attempt to change a company.