Best Buy returns to profit in 4th quarter
Best Buy shares jumped as much as 7 percent in Thursday morning trading as the company announced a return to a profit in the fourth quarter, topping Wall Street expectations.
Net income totaled $293 million for the three months that ended Feb. 1, the company reported Thursday. That's a big improvement over the same period last year when Best Buy showed a $409 million loss after taking roughly $1 billion in charges for restructuring and other one-time items.
The cost-cutting that helped in the last quarter will continue. Expenses will come down further primarily from lowering the cost of returned, replaced and damaged goods and reducing logistical and supply chain costs, the company said.
Best Buy officials have not specified job cuts, but they haven't disputed news reports that 2,000 managers are being laid off.
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Total annualized savings have now reached $765 million, exceeding the target management laid out in 2012. On Thursday, Best Buy told investors it has upped that target to $1 billion.
"Investors are happy to see better than expected earnings and to hear about an additional quarter billion dollars in cost cuts," said Brian Yarbrough, a retail analyst with the investment firm Edward Jones.
"I think the additional cost cutting through supply chain, returns and discounts and things like that are what's driving the stock, as well the Internet sales up 25 percent," he added. "Plus, it was pretty much priced for really bad news and I think so-so news is kind of driving the stock."
Even with today's jump, Best Buy stock remains down more than 30 percent since the beginning of the year.
Best Buy has been dealing with increased competition from online stores, notably Amazon.com, and discounters like Wal-Mart. Under chief executive Herbert Joly, the company has tried to turn around results, revamping merchandise, training employees and cutting costs.
That hasn't been enough to reverse a sales decline. Revenue in stores open at least one year, a key retail metric, fell 1.2 percent in the U.S. during the quarter, which includes the key holiday season. November and December can account for up to 40 percent of total sales for retailers.
"The fourth quarter was an environment of declining retail traffic, intense promotion, fewer holiday shopping days and severe weather," Joly said in a statement. "In the face of these unusual circumstances, our strategy to be price competitive and provide an improved customer experience resulted in market share gains in a weaker-than-expected consumer electronics market."
The Associated Press contributed to this report