Consumer electronics giant Best Buy reported disappointing sales and earning for the third quarter, which ended last month.
Reports out Tuesday from the company show that sales of laptop and tablet computers, appliances and e-readers rose. But Best Buy's sales of TVs, electronic games, mobile phones, and cameras declined. The news helped push Best Buy stock down about 6.5 percent.
Best Buy's overall revenue for the past quarter was flat, coming in at about $11.3 billion. But sales at U.S. stores open at least 14 months — a key industry benchmark — dropped about 3 percent. And net profits plunged 30 percent to $177 million.
Company CEO Brian Dunn attributed the lackluster sales and earnings to a lack of hot new games and phones — and consumer concerns about the economy. But he said Best Buy can turn things around for the rest of the year.
"We knew this year was going to be a volatile and uncertain consumer environment," he said. "We continue to believe in our multi-channel approach and are cautiously optimistic about the back half."
Dunn expects sales of tablet computers, electronic games and smart mobile phones will boost his company's sales and profits, especially during the critical Christmas shopping season. He expects several "iconic" must-have products are coming, though he didn't say what they would be.
But Morningstar analyst R.J. Hottovy said Best Buy will face vicious competition from rivals selling the same products at lower prices.
"Given that it's become a much more competitive landscape, I just don't see them undercutting a number of their rivals there," he said.
βIt could be a difficult holiday season for Best Buy.β
Snalyst R.J. Hottovy
Hottovy said Best Buy has had several tough disappointing Christmas seasons and the coming holiday season doesn't look all that bright for the retailer.
"I think consumers are going to be very value-conscious this Christmas and that favors the low-cost providers like an Amazon or Wal-Mart," he said. "It could be a difficult holiday season for Best Buy."
Consumers these days often discover Best Buy doesn't have the best price, he said.
"They're really feeling the impact of Amazon and other mass merchants being more aggressive in the consumer electronics space," he said.
One Wall Street analyst recently reported Amazon's prices on televisions are 12 percent to 14 percent below Best Buy's.
Thrivent Financial for Lutherans analyst Dave Heupel said Best Buy is facing a triple whammy of a poor economy, lack of exciting products and growing competition.
"There's really nothing that is driving any real excitement into the store and into consumer electronics," he said. "It's still a tough environment for Best Buy, not just from a consumer level but a competitive level. The Amazons of the world are still just eating away at their business."
During a conference call with analysts, CEO Dunn said the company is committed to serving consumers in stores and online. Dunn said many investors don't understand that approach positions Best Buy to give customers what they want whenever and wherever they want it. He also said the company has an important edge because of its employees' product knowledge and technology know-how.
But given that Best Buy's stock has lost about half its value in the past year, it's clear investors don't share Dunn's faith in his company — not when price seems to be all that matters to more and more consumers.