Tight cost controls boost Best Buy's profit

Tue Aug 20, 2013 1:27pm EDT
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By Dhanya Skariachan

(Reuters) - Best Buy Co Inc (BBY.N: Quote) reported its first quarterly profit in a year after keeping a tight lid on costs, further confirming that Chief Executive Officer Hubert Joly's turnaround plan for the world's largest consumer electronics chain is working.

The news, which boosted Best Buy shares as much as 13 percent to three times their price at the end of 2012, came a year after the restructuring expert took the helm of the company.

Under Joly, Best Buy has lowered costs by removing layers of management, cutting jobs and closing some stores. It has also announced plans to shed noncore assets such as its stake in a European joint venture with Carphone Warehouse CPW.L.

The efforts have boosted Best Buy's bottom line even as the company tries to reverse sales declines and fend off cutthroat competition from the likes of Wal-Mart Stores Inc (WMT.N: Quote) and Amazon.com Inc (AMZN.O: Quote).

Joly told Reuters he saw more room to cut costs, but stressed that he would focus on saving money on goods sold rather than on reducing headcount.

The company has been matching rivals' online prices and dedicating more space to faster-growing products such as smartphones and tablets.

Best Buy is doing "some degree" of same-day delivery in some U.S. markets, Joly said. On Tuesday, it said it planned to extend its "ship from store" test to more than 200 locations in time for the holiday season.

The company has also invested in employee training, store revamps and its website.   Continued...

Holiday shoppers wait outside Best Buy in preparation for Black Friday shopping during Thanksgiving Day in San Francisco, California November 22, 2012. REUTERS/Stephen Lam