Best Buy says sales to fall as more shoppers buy online

Tue Aug 26, 2014 1:51pm EDT
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By Sruthi Ramakrishnan

(Reuters) - Best Buy Co Inc, the largest U.S. consumer electronics retailer, said same-store sales were expected to fall and higher discounting would erode margins in the second half of the year.

Best Buy's shares fell as much as 7 percent on Tuesday after the company also reported lower-than-expected revenue for the third straight quarter, hurt by weak sales of consumer electronics and competition from online retailers.

The company said it expected same-store sales to decline in low single-digit percentage terms and operating margins to remain under pressure due to higher sales of lower-margin items online and discounting in Canada and China.

Same-store sales fell 2.7 percent in the second quarter ended Aug. 2, steeper than the 2.2 percent decline estimated by analysts polled by research firm Consensus Metrix.

U.S. same-store sales slipped 2 percent.

Operating margin fell to 2.7 percent from 4.5 percent.

Best Buy's gross margins have not grown in the past 14 quarters, partly due to competition from online retailers such as

Amazon's quarterly sales of electronics and general merchandise jumped nearly 30 percent in North America.   Continued...

A Best Buy store is pictured in Westminster, Colorado January 16, 2014.  Best Buy Co Inc, the largest U.S. specialty retailer of consumer electronics, reported lower-than-expected quarterly revenue for the third straight quarter, citing a drop in traffic in its stores as more people shop online, August 26, 2014.  REUTERS/Rick Wilking/Files