Best Buy profit beats estimates, shows signs of turnaround
By Siddharth Cavale
(Reuters) - Best Buy Co Inc reported a better-than-expected quarterly profit, showing signs that Chief Executive Hubert Joly's turnaround efforts were progressing and sending the company's shares up as much as 8.5 percent in morning trading.
Since joining in the fall of 2012, Joly has removed layers of management, eliminated hundreds of jobs, closed unprofitable stores and boosted Best Buy's cash reserves in efforts to stem sales declines.
While the company's sales are still falling, the rate of decline has slowed from 29 percent in the fourth quarter of 2012 to a 3.3 percent fall in the first quarter ended May 3.
"The new management team is working to untangle the old knot and set up more profitable pathways to customers," Stifel analyst David Schick said in a note. "We also believe vendors are showing support for BBY's success."
The company posted an adjusted profit of 33 cents per share, which topped the average analyst estimate of 20 cents, according to Thomson Reuters I/B/E/S.
However, rising grocery bills and higher fuel costs in the United States are weighing on consumers' ability to spend on discretionary items such as electronic goods.
Sears Holdings Corp on Tuesday said gross margins in its U.S. business fell 2 percentage points for the quarter due to low demand for home appliances.
Best Buy expects same-store sales to fall in the current quarter and the next on lower demand for many consumer electronics, and especially for mobile phones as shoppers were waiting to buy new models, the company said. Continued...