Best Buy (BBY) Shares Pummeled After Earnings Report
Shares of Best Buy Co., Inc. (BBY: Charts, News) closed down -1.79 or -13.02 percent to $11.96 per share in heavy trading on the NYSE Tuesday after the company announced dismal third quarter earnings due in part to a large restructuring charge and a 97 percent drop in operating income.
Best Buy stock dropped to a new 10-year low of $11.74 per share intraday after the news. Best Buy reported a loss of $10 million or -$0.03 per share in its third quarter ended on November 3rd, versus earnings of $156 million or $0.43 per share in the same period one year ago. The loss reflects the severity of the current economic downturn and its effects on the retail consumer electronics market. Daily Chart
Richfield, Minnesota based Best Buy Co., Inc. has been struggling with increasing competition from e-retailers such as Amazon.com (AMZN
) and e-Bay (EBAY
) as well as other retailers like Wal-Mart (WMT
) and Target (TGT
). In addition, Best Buy is coping with a shift in consumer buying of products with lower profit margins like smartphones and tablets instead of desktop computers and flat-screen TVs. After excluding one-time items, Best Buy reported it had earned $0.03 per share in the quarter, compared to analyst expectations of $0.13. The company reported same-store sales were off -4.3% in the quarter making it the ninth decline in the last 10 quarters. Despite dismal third quarter results, Best Buy CEO Hubert Joly seemed optimistic, in a post earnings conference with analysts and shareholders, he stated that, "We are confident that we can enhance the return on our existing assets by increasing the revenue they produce and taking out unnecessary or unproductive costs." Joly recently introduced a new strategy to turn the company around called "Renew Blue." The plan will cut costs and fight "showrooming," where customers come into the store to demo a product and then purchase it online or elsewhere from a competing vendor. To deal with showrooming, Best Buy has partnered with Red Laser, the company responsible for the mobile app that allows customers to scan and scram. Best Buy now offers discount coupons and instant ordering from Bestbuy.com on the app to customers who are already shopping in the store. While Best Buy stock hit a 10-year low after the news, the founder of the company Richard Schulze, who was ousted over a scandal earlier this year, is said to be preparing a buyout bid for the company. The bid has been reportedly around $8 billion or $26 per share, considerably more than Tuesday's $11.96 closing price. The next few days will be crucial for the struggling electronics retailer as consumers begin shopping for the holidays. With only 11 weeks on the job, Joly seems to have a good grasp on the problems facing the company and how to solve them, recently stating "There's nothing actually wrong with our market. For some reason, it seems like we took our eye off the ball and failed to focus on innovation." Other News About BBY The Lost Empire: Can Best Buy Make a Comeback?
Article on the company's chances for a solid turnaround. Best Buy Founder, CEO Plan Rare Talk
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Big Four Audit firms in trouble after HP allegations. Judge Convinces Union to Mediate with Hostess
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Published on Nov 21, 2012
By Jay Hawk