November 20, 2014 / 12:22 PM / 3 years ago

Best Buy profit beats estimates as costs fall

(Reuters) - Best Buy Co Inc BBY.N, the largest U.S. consumer electronics chain, reported a better-than-expected profit as cost cutting paid off and revenue increased after seven quarters of decline, even as it expected its current quarter earnings to remain under pressure.

A Best Buy store is pictured in Westminster, Colorado, in this file photo taken January 16, 2014. REUTERS/Rick Wilking/Files

Best Buy shares, which have fallen 11 percent this year through Wednesday’s closing of $35.54 on the New York Stock Exchange, were up 6 percent on Thursday.

For the current quarter Best Buy said it expects “near flat” revenue and comparable sales as sales of consumer electronics devices such as mobile phones fall.

Chief Executive Hubert Joly said on an earnings conference call there are several factors that could impact performance in the fourth quarter which include internal factors like faster growing sales of lower margin products and higher growth in the low-margin online business.

An intensely promotional competitive environment, a possible constraint in product availability in recent product launches such as the iPhone and a potential supply chain disruption related to the West Coast port delays could also hurt the company, he said.

The company has been facing intense competition from online retailers such as Amazon.com Inc AMZN.O as customers increasingly choose to shop online for appliances and items such as smartphones and laptops.

Since 2012, Best Buy has removed layers of management, cut jobs, shut stores and boosted cash reserves under its Renew Blue initiative.

The company said selling, general and administrative expenses fell about 5 percent in the third quarter ended Nov. 1. Operating margins doubled to 2 percent of total revenue.

Best Buy’s U.S. business showed signs of recovery in the third quarter as revenue increased 2.3 percent to $7.99 billion, driven by high demand for televisions, appliances and computers. U.S. same-store sales grew 3.2 percent — the first growth in four quarters.

Total same-store sales increased 2.2 percent, compared with a 2 percent decline estimated by analysts polled by research firm Consensus Metrix.

Total revenue rose slightly to $9.38 billion from $9.32 billion.

Net income attributable to Best Buy shareholders nearly doubled to $107 million, or 30 cents per share, from $54 million, or 16 cents per share, a year earlier.

Excluding items, the company earned 32 cents per share.

Analysts on average had expected a profit of 25 cents per share on revenue of $9.33 billion, according to Thomson Reuters I/B/E/S.

Reporting by Nandita Bose in Chicago and Ramkumar Iyer in Bangalore; Editing by Joyjeet Das and Chizu Nomiyama

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