Minneapolis - Best Buy reported lower revenue and net earnings in its fiscal third quarter, ended Nov. 27, which covered part of Thanksgiving weekend, as compared with last year.
Net earnings were $217 million, down $10 million year on year. Revenue was $11.89 billion, down from the prior year's $12.02 billion.
Comp-store sales were down 3.3 percent compared with last year, but operating income was up $9 million to $385 million during the quarter.
Best Buy reported its domestic segment's comp-store sales declined 5 percent driven primarily by lower industry demand in key categories and changes in market share. However, the domestic segment's gross profit rate was up 90 basis points year over year to 25 percent, driven primarily by the growth of Best Buy Mobile.
The domestic segment's fiscal third quarter revenue totaled $8.7 billion, a decrease of 3 percent vs. the prior-year period. Best Buy said the segment's revenue declined more than expected, driven primarily by larger-than-expected industry declines in key U.S. consumer electronics categories for the three months ending Oct. 31, as well as a decline in the company's estimated domestic market share for such period.
The domestic segment experienced a low-double-digit comp-store sales decline in TVs and entertainment hardware and software. Domestic comp-store sales decline in TVs was driven by a low-double digit decline in unit sales and a mid-single-digit price decline as the industry continued to experience softness during the quarter, Best Buy reported.
These declines were partially offset by a low double-digit comp-store sales increase in mobile phones, driven primarily by an increase in the mix of smartphone sales and a mid-single-digit increase in mobile computing, driven by strength in tablet computers. The company also noted that its domestic online revenue increased 7 percent in the fiscal third quarter vs. the prior-year period.
The company estimated its domestic market share declined 110 basis points vs. the comparable period last year for the three months, ended Oct. 31. The decline was driven primarily by declines in TVs, mobile computing and gaming software. Based on fiscal year-to-date trends, the company estimated that its domestic market share will decline for the full fiscal year as compared with the prior fiscal year.
The international segment's fiscal third-quarter revenue totaled $3.2 billion, an increase of 3 percent vs. the prior-year period. The revenue gain was driven primarily by the impact of new stores in the past 12 months and a 2.3 percent increase in comp-store sales.
The company's gross profit rate for the fiscal third quarter was 25.1 percent of revenue, an increase of 60 basis points when compared with the third quarter of fiscal 2010. The domestic segment gross profit rate for the fiscal third quarter was 25 percent, compared with 24.1 percent for the prior-year period. The 90 basis point year-over-year increase in the gross profit rate was due primarily to continued growth in Best Buy Mobile and improved promotional effectiveness due to lower costs in financing programs and improved pricing strategies.
Best Buy's operating income in the fiscal third quarter increased 2 percent to $385 million compared with operating income of $376 million in the prior-year period. The domestic segment reported fiscal third quarter operating income of $340 million, a decrease of 4 percent when compared with operating income in the prior-year period. The international segment generated operating income of $45 million for the fiscal third quarter, an increase of $22 million when compared with the prior-year period.