Best Buy Q1 net income rises, but misses view
Electronics retailer Best Buy reported worse-than-expected first-quarter earnings as the company spent more to promote its services and consumers held back on pricey electronics purchases.
Shares fell almost 6 percent in morning trading.
The Minneapolis company said Tuesday that consumers bought more cell phones at its mobile unit in the first quarter, but sales of TVs, gaming, music and movies were weaker.
Sales of notebook computers, mobile phones and appliances were strong, and the number of TVs sold actually rose, but that was offset by a decline in TV prices.
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Best Buy Co. said its net income edged up 1 percent to $155 million, or 36 cents per share, during the three months ended May 29 from $153 million, or 36 cents per share, a year ago.
Revenue rose almost 7 percent to $10.79 billion from $10.1 billion.
Analysts polled by Thomson Reuters expected earnings of 50 cents per share on higher revenue of $10.93 billion.
"Best Buy's first-quarter earnings missed consensus expectations by 14 cents due to an unexpected acceleration in selling, general and administrative spending, and, to a lesser extent, slightly weaker sales," said William Blair & Co. analyst Jack Murphy.
Selling, general and administrative revenue rose 12 percent during the quarter.
Revenue in stores open one year rose 2.8 percent. The measure is a key indicator of a retailer's financial health.
Best Buy benefited when its rival Circuit City closed last year, but it faces stepped up competition from online retailers and discount stores such as Wal-Mart.
Consumers cut down on electronics spending overall in May. MasterCard's SpendingPulse reported sales of consumer electronics fell 0.8 percent. SpendingPulse measures spending in all forms, including cash.
Wal-Mart Stores Inc. reported last month that most of its discretionary items, including electronics saw revenue declines in the first quarter from the year-ago period.
The discounter reported strong sales of large-panel TVs with new LED technology in laptops and in wireless devices as well as solid sales of DVDs. But video games and consoles were below expectations across all the gaming brands due to few new releases and the lack of innovation in gaming systems, according to Eduardo Castro-Wright, vice chairman of Wal-Mart.
The company reiterated its full year outlook for earnings of $3.45 to $3.60 per share on revenue of $52 billion to $53 billion.
Analysts expect earnings of $3.52 on revenue of $52.63 billion.
Shares fell $2.40, or 5.9 percent, to $38.65 in morning trading.
The stock has traded between $31.25 and $48.83 during the past 52 weeks.
(Copyright 2010 by The Associated Press. All Rights Reserved.)
