Best Buy Q2 Earnings Fall 30%

Alan Wolf -- TWICE, 9/13/2011

Minneapolis - Best Buy reported a 30.3 percent decline in second-quarter profits, to $177 million, and flat sales of $11.3 billion for the three months, ended Aug. 27.

U.S. sales slipped 1.5 percent to $8.3 billion, while comp-store sales declined 2.7 percent and online sales rose 13 percent.

Broken out by category, major appliances saw a 12 percent spike in comp sales, while the mobile computing comps (including tablets) increased 12 percent, which were offset by declines in TV, gaming, digital imaging and physical media. Best Buy also reported a 4 percent increase in subscription services for the quarter.

Comp sales of mobile phones fell 5 percent during the quarter, reflecting what the company described as "industry softness due to a lack of significant new phone launches during the quarter compared to the year-ago period."

Domestic gross profit declined 3 percent to $2.1 billion due to lower sales, continued promotions within select categories, and higher sales of services that include deferred revenue.

Total operating income declined 30 percent to $287 million due to the decline in gross profit dollars and higher costs related to the net addition of 113 Best Buy Mobile stand-alone stores and 14 big-box locations, as well as increased advertising.

In a statement, CEO Brian Dunn said the company "made good progress on our key strategic focus areas" despite lower CE industry sales and continued macro-economic challenges to overall consumer spending.

He added that the company is "well positioned to bring the benefits of our multichannel model to our customers and shareholders."

Looking ahead, the company has lowered its full-year earnings outlook and is projecting comp-store sales in the range of flat to negative 3 percent for the current fiscal year.