Best Buy Company, Inc
) posted first-quarter fiscal 2014 earnings of 32 cents a share
that surpassed the Zacks Consensus Estimate of 25 cents, but
dropped substantially by 57.9% from 76 cents earned in the
The year-over-year decline in the bottom-line was due to one
week less in the quarter under review compared with the
prior-year period, the shifting of the Super Bowl in the fourth
quarter of fiscal 2013, competitive pricing policies and no major
Including one-time items and discontinued operations, the
company reported quarterly loss of 24 cents a share sharply down
from earnings of 46 cents in the comparable prior-year
The company is undergoing through a turnaround program
including price match policy, multi-channel strategy, multi-year
cost reduction program and closing of some big box stores. Best
Buy in the quarter has been succeeded in lowering its cost by
$175 million, which is in addition to $150 million reduced in the
fourth quarter of fiscal 2012.
Moreover, the company is leaving no stone unturned in wooing
consumers and capturing incremental revenue, as evident from its
strategic initiative of opening "Samsung Experience Shops" within
Best Buy, which competes with
), had also entered into a contract to divest its 50% stake in
Best Buy Europe to Carphone Warehouse Group, the joint venture
partner in the same. The move would help this consumer electronic
retailer to concentrate more on its U.S. operations, which has
been facing a stiff competition from industry bellwethers such as
Wal-Mart Stores Inc.
). We believe that the step to offload stake in Best Buy Europe
would augment its return on capital employed.
Despite these catalysts, management cautioned that second
quarter gross profit and earnings would be weighed upon by
competitive pricing and investments made in areas such as online,
mobile, the multi-channel approach and refurbishment of its
website (bestbuy.com) functionality, which would not reap
benefits before fiscal 2015.
Coming to the results, total revenue for this Zacks Rank #3
(Hold) stock dropped 9.6% to $9,380 million, and also fell short
of the Zacks Consensus Estimate of $10,791 million.
Comparable-store sales edged down 1.3% compared with a decline of
5.2% in the prior-year period.
Gross profit slid 16% year over year to $2,170 million during
the quarter due to weak top-line performance, whereas gross
margin contracted 180 basis points to 23.1%. Adjusted operating
income plunged 54.1% to $186 million, whereas operating margin
plummeted 190 basis points to 2%.
segment revenue fell 9.6% to $7,979 million. However, excluding
one week in the prior-year period, revenue decreased 2.2% due to
closure of 49 big box stores and a decline of 1.1% in
comparable-store sales. The drop in comps was due to shift of the
Super Bowl into fourth-quarter fiscal 2012 and trimming of sales
in non-core areas.
Domestic online sales jumped 7.1% to $498 million. Excluding
the extra week, online sales surged 16.2% on the back of improved
Robust growth in mobile phone and appliances was witnessed
during the quarter. However, this was offset by decline in gaming
and home theater.
The segment's gross profit fell 16.2% to $1,871 million during
the quarter, while gross margin came in at 23.4%, down 190 basis
points due to rise in promotional activities and increase in
segment revenue tumbled 9.6% to $1,401 million. Excluding one
extra week, the revenue fell 5.1% because of closure of 15 big
box stores and a decline of 2.8% in comparable-store sales. The
drop in comps was due to competitive environment in Canada but
partially offset by effective comps growth across China on the
back of promotional strategies.
The International segment's gross profit dipped 14.8% to $299
million during the quarter, while gross margin shrunk 130 basis
points to 21.3%, reflecting lower margin product mix forming part
of revenue generated from China and increased promotional
Other Financial Details
Best Buy ended the quarter with cash and cash equivalents of
$908 million, long-term debt of $1,142 million and shareholders'
equity of $2,916 million, excluding non-controlling interest of
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