DECEMBER 16, 2008, 12:22 P.M. ET Best Buy Pulls Back Amid Slump
A WALL STREET JOURNAL NEWS ROUNDUP http://online.wsj.com/article/SB122943321826610285.html Best Buy Co. said Tuesday it is slashing capital spending and offering buyouts to corporate employees, as the consumer-electronics retailer posted a 77% drop in quarterly profit amid weak sales. "The historic slowdown in the economy and its effect on our business over the past 90 days have been the most challenging consumer environment our company has ever faced," Chief Executive Brad Anderson said in prepared remarks. He also said potentially long-lasting change in consumer behavior requires "significant adjustments to our present cost structure." On Monday, nearly all of the roughly 4,000 employees at Best Buy's headquarters became eligible for a voluntary separation package. Layoffs may be required, depending on the response to the buyout offer, the company said. Capital spending, pegged at $1.2 billion in the current fiscal year, is expected to fall 50% next year with a "substantial reduction" in new store openings. In the latest quarter, the company opened 37 stores, putting its domestic store count at 1,010. Best Buy is just the latest retailer to announce cutbacks in a slumping economy. Most notably, Circuit City Stores Inc., a major rival of Best Buy, filed for bankruptcy-court protection last month. For its fiscal third quarter ended Nov. 29, Best Buy reported net income of $52 million, or 13 cents a share, down from $228 million, or 53 cents a share, a year earlier. The latest quarter included a write-down of 22 cents a share on the company's investment in struggling U.K. chain Carphone Warehouse Group PLC. Quarterly revenue rose 16% to $11.5 billion. However, the company said that excluding results for Best Buy Europe, revenue declined "modestly." Also, same-store sales, or sales at stores open at least 14 months and including Internet sales, fell 5.3%. Best Buy, the largest U.S. consumer-electronics chain, said its market share was higher than a year earlier, reflecting strong sales of computer products and televisions. J.P. Morgan analyst Christopher Horvers said "market-share donations" from Circuit City may already be materializing, as the struggling retailer retrenches. Best Buy's gross margin rose to 24.9% from 23.5%, driven by strong European sales of higher-margin mobile phones, offsetting brisk sales of lower-margin notebook computers. Best Buy lowered its fiscal-year outlook last month amid "rapid, seismic changes in consumer behavior." On Tuesday, the company reiterated its earnings view of $2.30 to $2.90 a share excluding charges, while raising the low end of a projected same-store-sales decline to 5% from 8%. Last week, Best Buy President Brian Dunn said business was picking up before Christmas, helped by a resurgence in sales of home theater and Blu-ray players and strong sales of gaming systems, "smart" phones and notebook computers. Nonetheless, on Tuesday the company acknowledged that December results less far have been disappointing. Best Buy's shares were ahead 15% at $27.06 in morning trading in New York on Tuesday, as investors focused on the company's cost-cutting efforts, as well as its improved profit margin. -- ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 Mail: antunes at uh dot edu *********************************** * POST TO [email protected] * *********************************** Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
