Best Buy Co., the nation's biggest consumer electronics retailer, said Tuesday that its third-quarter profit sank as it faced dramatic changes in consumer spending and added it will offer buyout packages to nearly all its corporate employees in an effort to cut costs.
The company also plans to cut capital spending by 50 percent in 2009 and open "significantly" fewer stores in the U.S., Canada and China.
Chief Executive Brad Anderson called the past 90 days the "most challenging consumer environment our company has ever faced," and said there has been a "dramatic and potentially long-lasting change in consumer behavior."
The company had already seen its biggest rival, Circuit City Stores Inc., file for Chapter 11 bankruptcy protection in November.
Profit at Richfield, Minn.-based Best Buy fell 77 percent to $52 million, or 13 cents per share, in the three months ended Nov. 29. That's down from $228 million, or 53 cents per share, a year ago.
Excluding a charge related to a decline in market value of its 2.9 percent stake in U.K. company Carphone Warehouse, net income totaled 35 cents per share, ahead of the 24 cents per share analysts polled by Thomson Reuters, on average, expected.
Revenue rose 16 percent to $11.5 billion from $9.93 billion last year. Analysts expected revenue of $11.09 billion. Same-store sales, or sales in stores open at least 14 months, fell 5.3 percent during the quarter. Same-store sales are considered a key indicator of a retailer's health because it measures sales at existing stores rather than newly opened ones.
He said in an effort to cut costs, nearly all corporate employees are eligible for a voluntary buyout package which offers a "significant" increase in the company's base severance offer. Layoffs may be required depending on how many staff take the buyout deal.
Best Buy reiterated its full-year guidance for earnings of $2.30 to $2.90 per share, excluding the investment charge, and expects same-store sales will fall 1 percent to 5 percent for the year. Analysts expect earnings of $2.51 per share.
Shares in Best Buy rose $2.13, or 9.1 percent, to $25.60 during premarket trading.
(Copyright 2008 by The Associated Press. All Rights Reserved.)