MINNEAPOLIS (AP) — Best Buy Co. said Tuesday that its fiscal first-quarter profit dropped 26 percent on restructuring charges as the struggling electronics retailer began implementing its turnaround plan.
Its adjusted earnings and revenue both topped Wall Street’s expectations, briefly sending Best Buy shares up 7 percent in premarket trading before turning lower.
The results provided some sorely needed good news for the electronics chain, which is attempting to update its increasingly outmoded “big-box” store model, as competition from discounters and online retailers remains tough. It is also seeking a new CEO after Brian Dunn abruptly resigned in April.
Best Buy said U.S. sales growth in tablets, mobile phones, e-readers and appliances helped offset declines notebooks, gaming, digital imaging and TVs during the quarter.
Still, revenue in stores open at least one year, a key retail metric, fell 5.3 percent during the quarter, dragged down by weakness in Europe and China. The measure includes online sales and excludes stores that have opened or closed over the past two years.
Best Buy has been shrinking store size and focusing on its more profitable business in an effort to combat the so-called “showrooming” of its stores — when people browse at Best Buy but purchase electronics goods elsewhere. In April it announced a major restructuring that includes closing stores, cutting 400 jobs and trimming $800 million in costs.
“We know we have to better adapt to the new realities of the marketplace, and we are creating a long-term plan designed to make Best Buy more relevant with customers, and position the company for sustained, profitable returns in the years ahead,” said interim CEO Mike Mikan.
In addition, Best Buy is facing turmoil in its executive ranks. In April, an internal investigation found that Dunn violated company policy by having an inappropriate relationship with a female employee. That investigation also resulted in the ouster of founder and chairman Richard Schulze, who knew about the relationship and failed to alert the board or human resources. Chief Marketing Officer Barry Judge also recently left the company.
The Minneapolis-based company reported net income fell to $158 million, or 46 cents per share, in the three months ended May 5. That’s down from $212 million, or 53 cents per share, a year ago.
Excluding restructuring charges, earnings were 72 cents per share. Analysts expected 59 cents per share, according to FactSet.
Revenue rose 2 percent to $11.61 billion, aided by an extra week. Domestic revenue rose 5 percent to $8.82 billion, but international revenue fell 6 percent to $2.79 billion on weakness in China and Europe. Wall Street expected $11.5 billion.
Best Buy affirmed its adjusted 2013 net income guidance of $3.50 to $3.80, excluding restructuring charges. Analysts expect $3.60 per share.
Shares fell 17 cents to $18 per share 45 minutes ahead of the market opening after rising as high as $19.73 shortly after reporting its earnings.
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