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Best Buy (BBY)
Q3 2013 Earnings Call
November 20, 2012 9:00 am ET
Bill Seymour - Vice President of Investor Relations
Hubert Joly - Chief Executive Officer, President and Director
James L. Muehlbauer - Chief Financial Officer and Executive Vice President of Finance
Michael A. Vitelli - Executive Vice President and President of US Operations
Christopher Horvers - JP Morgan Chase & Co, Research Division
Colin McGranahan - Sanford C. Bernstein & Co., LLC., Research Division
Daniel T. Binder - Jefferies & Company, Inc., Research Division
Michael Lasser - UBS Investment Bank, Research Division
David Gober - Morgan Stanley, Research Division
Daniel R. Wewer - Raymond James & Associates, Inc., Research Division
Scot Ciccarelli - RBC Capital Markets, LLC, Research Division
Matthew J. Fassler - Goldman Sachs Group Inc., Research Division
Alan M. Rifkin - Barclays Capital, Research Division
Michael Baker - Deutsche Bank AG, Research Division
Previous Statements by BBY
» Best Buy Management Discusses Q2 2013 Results - Earnings Call Transcript
» Best Buy Management Discusses Q1 2013 Results - Earnings Call Transcript
» Best Buy's CEO Discusses Q4 2012 Results - Earnings Call Transcript
Good morning and thank you for joining us on our Fiscal Third Quarter 2013 Conference Call. We have 2 speakers today: Hubert Joly, our President and CEO; and Jim Muehlbauer, our CFO, who is continuing in his role until December 10, when Sharon McCollam will join Best Buy. After our prepared remarks, we'll be happy to take Q&A.
A few items before we get started. As usual, the media are participating in this call in a listen-only mode. Let me remind you that comments made by me or by others representing Best Buy may contain forward-looking statements, which are subject to risks and uncertainties. Our SEC filings contain additional information about factors that could cause actual results to differ from management's expectations.
Please note that our reported results this morning including non-GAAP financial measures. These results should not be confused with the GAAP numbers we reported this morning in our earnings release or with the GAAP numbers we will report in our 10-Q. For GAAP to non-GAAP reconciliations of our reported to adjusted results and guidance, please refer to the supplemental schedules in this morning's news release.
And one other housekeeping item. We plan to announce holiday revenue results for the 9 weeks ending January 5, 2013, for fiscal November and December on January 11, 2013.
Now I'd like to turn the call over to Hubert.
Thank you, Bill, and good morning, everyone. And thanks to all of you for joining the call and to those who attended our Analyst Day last week. And for those of you that were not able to attend, please note that the webcast is available on our website.
On that day, we shared a candid assessment of Best Buy. We highlighted Best Buy's strengths and underscored its performance has been unsatisfactory in a number of areas over the last 3 years. We also unveiled Renew Blue, a set of priorities to begin reinvigorating the company's performance and rejuvenating Best Buy.
Today, we are reporting our third quarter financial results. In line with trends experienced over the last 3 years, Best Buy's financial performance during the quarter was clearly unsatisfactory. The results we're reporting today only strengthens our sense of urgency and purpose.
Now there were some positive developments during the quarter. We did well in a number of product categories, including mobile phones, appliances and tablets and eReaders. We had positive comps in these categories. We also grew market share year-over-year in these product categories, as well as in notebooks. In addition, our online channel continue to grow at over 10% year-over-year.
However, our overall performance was not satisfactory. Now some of it can be attributed to the effect of product transitions, especially related to the Windows 8 launch and the launch of several new smartphones and tablets. These product transitions have had a negative impact on sales and margins in the quarter as customers delayed their purchases in anticipation of new products to be introduced.
At the same time, we also had a number of items that impacted our bottom line, including investments in front-line training and compensation, as well as executive transition expenses. So we do not believe that the rate of decline that Best Buy experienced in the third quarter can be extrapolated in anyway.
Now let me be clear, we are determined to turn around the performance of the company. And on November 13, we outlined the priorities that we are focused on to turn around and transform our Domestic business including, number one, reinvigorating and rejuvenating the customer experience by putting the customer at the center of what we do, addressing their needs and providing superior value to them. This means both improving our execution, as well as working on reinventing the business. And number two, increasing our return on invested capital with an unrelenting focus on revenue growth, efficiency and disciplined capital allocation.
Our view is that we have ample opportunities to improve ROIC by improving the operational performance of our business and capturing key market opportunities in our space. We are confident that we can enhance the return on our existing assets by increasing the revenue they produce and taking out unnecessary or unproductive costs.
In the short term, of course, we are also focused on making the holiday season successful. We know that 3/4 of Americans intend to give customer electronics -- excuse me, consumer electronics as a gift for the holidays. Tens of millions will be coming to us online and into our stores between now and the end of the season, and we are ready for them. There's a range of exciting new products to buy at Best Buy, including Windows 8 and other new computing products, new phones, new tablets, new game releases and a new gaming platform, the Wii U. We are also expecting to see a positive impact for this holiday from significantly ramped up Blue Shirt training, the introduction of variable bonus pay for performance for full-time sales associates, as well as our holiday Price Match strategy.