Best Buy plans to get small as sales fall
Best Buy 4Q net income falls on weaker demand for TVs, but adjusted results beat expectations
ap
*
Share
*
retweet
* Email
* Print
*
Companies:
o Apple Inc.
o Best Buy Co., Inc. Common Stock
o Wal-Mart Stores, Inc. Common St
In this March 21, 2011 photo, a shopper is seen in front of TV screens at the Best Buy store in Williston, Vt. Best Buy’s fourth-quarter net income fell 16 percent as the company restructured and faced weak sales of TVs and other electronics Thursday, March 24. (AP Photo/Toby Talbot)
Related Quotes
Symbol Price Change
AAPL 345.07 +5.88
Chart for Apple Inc.
BBY 30.18 -1.67
Chart for Best Buy Co., Inc. Common Stock
WMT 52.76 +1.12
Chart for Wal-Mart Stores, Inc. Common St
Follow these stocks
{"s" : "aapl,bby,wmt","k" : "a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" : "","j" : ""}
Mae Anderson, AP Retail Writer, On Thursday March 24, 2011, 1:04 pm EDT
NEW YORK (AP) -- Weak demand for pricey flat-screen TVs and notebook computers helped push Best Buy Co.'s fourth-quarter net income down 16 percent.
The decline adds urgency to the electronics retailer's bid to remake its business by opening smaller stores and focusing on more profitable, fast-growing categories such as tablet computers and smartphones.
Fourth-quarter net income fell to $651 million, or $1.62 per share, from $779 million, or $1.82 per share.
Best Buy has been restructuring its international operations, particularly in China, and cutting costs in its U.S. supply chain. Excluding costs for those moves, net income totaled $1.98 per share. That beat the $1.84 analysts expected, according to FactSet.
Revenue edged down 2 percent to $16.26 billion. U.S. revenue fell 4 percent to $12.1 billion, while international revenue rose 4 percent to $4.1 billion.
Best Buy, the largest U.S. electronics chain, is contending with declining sales in a changing electronics market where more people are buying online or in discount stores such as Wal-Mart.
As more consumers do research online, they no longer need to traipse to a big-box store to see all of the latest TV models on offer, eliminating a key advantage for Best Buy.
In addition, new TV technologies, such as 3-D and Internet-enabled TVs, have failed to capture Americans' imagination -- and dollars -- the way smartphones and tablets like Apple Inc.'s iPad have.
To combat this, Best Buy says it is focusing on profitable areas where it has a relatively small share of the market, expanding selections of mobile phones, video games, appliances, e-readers and tablet computers.
It has shrunk space dedicated to less popular products. For example, its cut space for compact discs in half last year.
Best Buy is changing its TV-selling strategy by significantly increasing TV selection online -- offering 100 models in stores but 300 more online only at more competitive prices.
The chain is also pushing hard to open smaller stores. The company is opening 150 smaller-format mobile only stores by the end of the year, nearly doubling its total to 325.
"We are exploring and redefining what the optimal big-box footprint is for us," CEO Brian Dunn said on a call with analysts.
Michael Vitelli, president of the Americas, said Best Buy doesn't plan to compete on price alone, but offer a variety of deals on financing, buy-back programs and services and other promotions that will vary by product category.
While those deals add value to purchases, they don't always translate well in product-price comparison searches, he said, so the company plans to try to market the deals more effectively.
"We sell thousands of products and services in dozens of different categories," Vitelli said. "Applying a single pricing strategy across all of our products in categories would not be practical or rewarding."
Revenue in stores open at least 14 months fell 4.6 percent during the three months ending Feb. 26, including a 5.5 percent decline in the U.S. That's an important retail measurement because it excludes stores that open or close during the year.
For the year, net income fell 3 percent to $1.28 billion, or $3.08 per share, from $1.32 billion, or $3.10 per share last year.
Revenue rose 1 percent to $50.27 billion from $4.97 billion.
In fiscal 2012, the company expects net income of $3.30 to $3.55 per share, excluding costs related to restructuring its international operations and cutting costs in its U.S. supply chain. Analysts expect $3.56 per share.
Best Buy predicts revenue of $51 billion to $52.5 billion. Analysts expect $52.1 billion.
Shares fell 90 cents, or 2.8 percent, to $30.95 during midday trading. |
