Minneapolis — Cost controls and improved operational efficiencies returned Best Buy to profitability in the third quarter.
Net earnings for the three months, ended Nov. 3, rose to $54 million, compared with a year-ago loss of $10 million.
But poor international sales were a drag on net revenues, which were flat at $9.3 billion. Comp sales also stalled due to offshore weakness, although the 0.3 percent increase was an improvement over last year’s 5.1 percent comp decline.
In the U.S., revenue rose 2.3 percent to $7.9 billion and comps increased 1.7 percent. Excluding disruptions from sales floor re-merchandising and the rollout of 400 Windows Store departments, comps would have grown about 2 percent, Best Buy said.
In contrast, domestic online comps rose 15.1 percent on sales of $499 million due to increased site traffic, bigger average ticket, more online orders placed in Best Buy stores, and greater inventory availability as the chain earmarked more warehouse space for online orders and began shipping web orders from select stores.
Driving the online and in-store increases were gains in mobile, majaps and notebooks, which were partially offset by anticipated declines in gaming, movies and digital imaging. Broken out by category, majap comps increased 23.5 percent; computing and mobile phone comps rose 6.7 percent; and services comps gained 3.3 percent. In contrast, CE comps declined 2.5 percent and entertainment comps fell 26.8 percent.
Domestic selling, general and administrative expenses (SG&A) declined 180 basis points, from $1.8 billion or 23.5 percent of revenue last year to $1.7 billion or 21.8 of revenue during the quarter, as Best Buy cut another $115 million in annualized costs, implemented tighter company-wide expense management, lowered store labor costs, and completed separation payouts to prior management.
Overseas, revenue fell 11.2 percent to $1.5 billion and comps declined 6.4 percent due to store closings in Canada and China and unfavorable currency exchange rates.
In a statement, president/CEO Hubert Joly said, “We are pleased with the progress of our Renew Blue transformation efforts,” but remain mindful that “we still have a long way to go.”
But chief financial officer Sharon McCollam cautioned that the company’s commitment to remain competitive in a highly promotional holiday season will likely impact fourth-quarter profitability.