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Best Buy Sales Rise But Q3 Profits Fall 29%

12/19/2011 12:01:00 AM Eastern
MINNEAPOLIS — Best Buy showed gains in third-quarter revenue and compstore sales, but they came at a cost.

Net earnings fell 29 percent to $154 million for the three months, ended Nov. 26, as the company flexed its promotional muscles during Black November and took a $150 million pretax restructuring charge to shut its 11 bigbox U.K. stores and dispose of certain “entertainment assets” in the U.S.

“We took actions to provide value to customers and drive our business in this competitive consumer environment,” noted CEO Brian Dunn. The result, he said, was “positive traffic, comparable store sales growth and continued progress on our key strategic focus areas, highlighted by strong performance online.”

Total revenue rose 1.7 percent to $12.1 billion during the quarter on essentially flat comp-sales growth of 0.3 percent.

Within the U.S., net sales edged up 2 percent to $8.9 billion and comps increased 0.9 percent, up from last year’s 5-percent fall and reversing five consecutive quarters of same-store sales declines.

In addition, an expanded online assortment and more competitive pricing helped fuel a 20 percent increase in ecommerce sales.

Dunn told analysts during an earnings call that Best Buy will continue to use price to drive traffic and sales, and will boost operating income by being “relentless focused” on attaching subscriptions and service plans while cutting costs and driving efficiencies throughout the system.

On the product front, mobile computing (including tablets, e-readers and notebooks), appliances, mobile phones and movies all posted the strongest comp store gains, with majaps rising 13.7 percent, mobile phone comps climbing 9 percent, and comp sales of carrier contracts, mobile broadband and other subscriptions increasing 8 percent.

The gains were partially offset by comp declines in digital imaging, gaming and TV. The latter showed sequential improvement from prior quarters, the company said, resulting in a low single-digit comp decline during the quarter.

Broken out by category, CE, which represented 35 percent of the sales mix, fell 4.8 percent; computing and mobile phones, which were 40 percent of the mix, rose 8.8 percent; entertainment, which was 13 percent of the mix, fell 9 percent; appliances, which comprised 5 percent of the sales mix, rose 13.7 percent; and sales of extended warranties and service contracts, which were 6 percent of the mix, slipped 0.7 percent.

Looking ahead, Best Buy’s full-year revenue projections remain unchanged at about $51.8 billion, with comp sales coming in at flat to a 3-percent decline.
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