Best Buy reports third quarter same-store sales fell 4.3 percent
Nov 20, 2012 (Star Tribune (Menafn - Minneapolis) - McClatchy-Tribune Information Services via COMTEX) --Best Buy CEO Hubert Joly told analysts Tuesday morning that the company's worse than expected third quarter results will not spill over to the key holiday shopping season and fiscal 2013.
The Richfield-based consumer electronics retailer said excluding restructuring costs, profits from continuing operations for the three months ended Nov. 1 fell 94 percent to 10 million, or three cents a share, compared to 173 million, or 47 cents a share during the same period a year ago.
The deterioration came from higher expenses and a 4.3 percent decline in sales at stores open for at least a year, a key measure for retail growth.
Best Buy stock fell about 1.30, or 9 percent, in mid-morning trading to 12.54.
But Joly said the company will not replicate its third quarter numbers going forward.
"We do not believe the rate of decline in the quarter can be extrapolated in any way," Joly said. "I know this will be a rough road. But we are confident we can enhance the performance of our current assets."
For one thing, Best Buy expects a strong lift from new product launches, including the release of Windows 8. The retailer carries 45 Windows 8 products exclusive to Best Buy, including 28 touch screens devices.
"It's something we fell good about going into the fourth quarter," said Mike Vitelli, the outgoing head of Best Buy's North American operations.
The company said they also invested heavily in retraining store employees, known as Blue Shirts, for the upcoming holiday season based on the model of its highly successful Best Buy Mobile format. The training, which is one reason for Best Buy's jump in expenses for the third quarter, will pay off in higher store-base sales, Vitelli said.
But the company's declining numbers still made some analysts nervous. For example, Best Buy significantly reduced its estimated free cash flow for fiscal 2013 to 850 million to 1.05 billion compared to its earlier estimate of 1.25 billion to 1.5 billion.
As a result, analysts speculated that Best Buy may need to suspend the dividend to preserve its cash.
Joly said the company has not yet made a decision about the dividend, except that it currently has "no intention" of suspending it.
However, "we will look carefully at our cash and investments," Joly said. "The use of capital will be a prudent one."
Thomas Lee --612-673-4113
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