Best Buy suspends profit outlook, share buybacks
By Dhanya Skariachan
(Reuters) - Electronics retailer Best Buy Co Inc (BBY.N: Quote) - its share price near a nine-year low - suspended profit forecasts and share buybacks for the rest of the year on Tuesday to give its newly named chief executive time to construct his own turnaround plan.
The moves came in tandem with weaker-than-expected quarterly earnings and underlined the challenges facing Hubert Joly in reviving the company, the world's largest consumer electronics retailer.
Adding to the company's woes was weak demand for electronics in key markets, particularly China, to a degree that took analysts by surprise.
"The clock is ticking on this one. He doesn't have the liberty of taking time to get to know the business model intimately," said Stacey Widlitz, president of consulting firm SW Retail Advisors, referring to Joly. "Investors are impatient, and the last thing you want to do is make vendors impatient."
Some on Wall Street such as BB&T Capital Markets analyst Anthony Chukumba were disappointed to see Best Buy withdraw its outlook. The retailer cut its fiscal year earnings forecast without giving a figure and said it did not expect to further update its outlook for the year.
Chukumba said it was a "little bit jarring" to see the company withdraw its profit outlook, especially since he expects industry fundamentals to improve sequentially in the back half of the year, driven by the upcoming debuts of Windows 8, the iPhone 5, the Nintendo Wii U video game console, and a stronger videogame title release schedule.
Best Buy's problems have been compounded by "dinosaur (store) formats that we just don't need any longer," Widlitz said.
Critics have complained that Best Buy has become a showroom for Amazon.com Inc (AMZN.O: Quote) and other online retailers as shoppers go to its stores to check out electronics like high-definition televisions, then buy them elsewhere for less. Continued...