Best Buy Q1 Income Declines 26%22 May, 2012 By: Erik Gruenwedel
Best Buy Co. May 22 reported first-quarter (ended May 5) net income of $158 million, down nearly 26% from income of $212 million during the previous-year period.
The Minneapolis-based No. 1 consumer electronics retailer attributed much of the decline to ongoing restructuring charges and weak European and China markets as it attempts to turn around operations in a rapidly changing market.
Domestic same-store entertainment sales plummeted nearly 28%, compared with a decline of 12% during the previous-year quarter. Entertainment sales include packaged media such as movies, music and video games.
Domestic revenue increased about 5% to more than $8.8 billion, underscored by 20% same-store sales growth in e-commerce and 13% increase in mobile phones.
Sales growth in tablets, mobile phones, e-readers and appliances was more than offset by sales declines in notebooks, gaming, digital imaging and televisions.
Best Buy said it closed 41 of 50 big-box stores planned to close in the fiscal year, while rolling out smaller-footprint test stores in San Antonio and Minneapolis, Minn.
Interim CEO Mike Mikan, who has been on the job six weeks following the abrupt resignation of CEO Brian Dunn, said the retailer had a lot of work to do restructuring operations, including downsizing costs based on a "need to have" rather than "would like to have" basis.
Mikan said that an essential component in moving Best Buy forward is acknowledging the "truth" about where it stands today, including having lost "that unique experience" with customers.
"Best Buy is not performing up to past standards," he told analysts on a call. "We need to change substantially. We need to change who we are and what we do. And how we relate to customers and shareholders."
Mikan said Best Buy is not in danger of going out of business. He said he would oversee a "fresh look" at the business and its capital investments. Best Buy in Q4 said it would slash $800 million in costs in the new fiscal year.
"I can assure you there will be no sacred cows," Mikan said, adding he would outline details in the next few months.
Dunn stepped down following the fourth quarter after it was disclosed he was the focus of an internal investigation regarding personal conduct. In addition, founder and chairman Richard Schulze was rebuked for not disclosing his awareness of Dunn’s behavior, among other actions.
Best Buy May 21 said it retained an executive search firm with a mandate to find a permanent CEO within the next six to nine months.