Best Buy Posts $81 Million Q1 Loss21 May, 2013 By: Erik Gruenwedel
Online revenue increases to $498 million, which includes movie sales on CinemaNow
Best Buy Co. May 21 reported a first-quarter (ended May 4) net loss of $81 million compared to net income of $158 million during the previous-year period.
The Minneapolis-based consumer electronics retailer said global revenue fell nearly $1 billion to $9.3 billion, which reflected in part the company’s previously-announced plan to sell a 50% stake in Best Buy Europe. Domestic sales dipped 2.2% to $7.9 billion when factoring in an additional week of revenue during the previous-year period.
Sam-store sales in the U.S. declined 1.1%, which was an improvement from a decline of 3.7% last year. Strong growth in mobile phone and appliances was more than offset by declines in home theater and gaming.
CEO Hubert Joly said Best Buy is making progress, which he attributed to a 16% increase in online sales to $498 million. Online revenue includes digital movie sales on CinemaNow. Other benchmarks included improving customer service 3% in the past five months; reaching an agreement with Samsung to establish Samsung Experience Shops in select retail stores; negotiating overall rent reductions for a number of stores and closing one large format store; and eliminating $175 million in annualized SG&A and supply chain costs in addition to $150 million eliminated last quarter.
Joly reiterated Best Buy’s changed strategy toward packaged media with shelf space previously allocated to music CDs and DVD movies replaced with higher margin categories like mobile, appliances and accessories. Specifically, Best Buy is allocating that store space to new Samsung branded in-store retail fronts.
“The feedback we're getting from customers is very positive because [they] can now look at the Samsung set of products and customer experiences as well as other competing universes,” Joly said.
Wedbush Securities analyst Michael Pachter hailed Best Buy's online revenue, he cautioned that market segment will only get more competitive going forward.
"It is possible that online growth will outpace domestic comp declines, but we don't believe that is likely, especially in Q4; rather, we think domestic comp declines will accelerate at holiday from increased price competition from online merchants, and we believe that Best Buy is positioned to significantly disappoint later this year," Pachter wrote in a May 21 note.