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 surprisingly weak demand for electronics in key markets, particularly China where retailers have been hit by the country's slowest economic growth in three years.
"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."
Best Buy cut its fiscal year earnings forecast without giving a figure and said it did not expect to further update its outlook for the year.
BB&T Capital Markets analyst Anthony Chukumba said it was a "little bit jarring" to see the company withdraw its profit outlook, especially since he expects industry fundamentals to improve, 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.
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.
Ending the practice of showrooming is a top priority, Best Buy said in June. Continued...