Minneapolis - Increased promotions, higher transportation costs and disrupted digital imaging shipments contributed to soft sales and falling profits during Best Buy's first fiscal quarter.
Net earnings declined 12.3 percent to $136 million for the three months, ended May 28, on net revenue of $10.9 billion, a 1.4 percent gain. Comp-store sales slipped 1.7 percent company-wide.
In the U.S., revenue was essentially flat at $7.9 billion while comp-store sales fell 2.4 percent. Operating income declined 21 percent to $234 million, compared with a 10 percent decline company-wide to $282 million.
U.S. gross profit declined 3 percent to $2 billion, compared with a 6 percent increase overseas to $798 million, as the domestic gross profit rate declined by 60 basis points. Best Buy attributed the drop to increased promotions to drive improved revenue; industry-wide supply interruptions of digital imaging products due to the earthquake and tsunami in Japan; higher transportation costs; and a large, annual vendor rebate in the first quarter of 2010 that impacted year-over-year comparisons.
Partially offsetting the declines was a 28 percent spike in cellphone sales, a 12 percent increase in online revenue, and a 20 percent increase in subscriptions and other "connection" sales in the U.S. The company also pointed to strength in mobile computing and tablets, as well as e-readers, appliances and warranty, and repair and installation services, but reported weakness in TV, digital imaging and physical media.
Broken out by category, domestic comp-store sales for the newly combined computing and mobile phone categories rose 4.7 percent, to 40 percent of the mix; majap comp sales rose 2.9 percent, to 6 percent of the mix; CE comps, including TV and digital imaging, declined 6.8 percent, to 35 percent of the mix; comps for entertainment, including music and movies, fell 13.1 percent, to 12 percent of the mix; and services comps remained flat at 6 percent of the mix.