NEW YORK — Results were a mixed bag for retailers this quarter, with Best Buy beating expectations despite sales declines, and Walmart and Sam’s Club taking a hit from the (now resolved) West Coast port delays.
RadioShack, meanwhile, witnessed some bittersweet resolution of its own late last month, when a federal bankruptcy court OK’d its sale of intellectual property to hedge fund Standard General over the objections of a rival bidder and amid privacy concerns raised by numerous state attorneys general.
Best Buy reported a 72 percent decline in fiscal first-quarter net earnings, to $129 million, which it attributed to a year-ago tax benefit and weak international results.
Net sales slipped 0.9 percent to $8.6 billion as unfavorable currency fluctuations and disruptions in the Canadian market offset modest U.S. gains. Despite the downturns – which largely reflected a one-time earnings boost from a $353 million tax benefit last year – Best Buy’s results surpassed analysts’ expectations, sending shares up over 8 percent this morning.
Excluding the year-ago tax benefit, non-GAAP profits rose 6.5 percent to $131 million for the three months, ended May 3.
In the U.S., continued growth in major appliances, a strong product cycle for large-screen TVs and flagship phones, and an improving “multichannel customer experience” led to better-than-expected performance, reported president, CEO and chairman-elect Hubert Joly.
U.S. revenue increased 1.4 percent and comp sales edged up 0.6 percent including the benefit of mobile phone installment billing, but slipped 0.7 excluding the carriers’ new payment plans. Gains in TVs, mobile phones and majaps were more than offset by declines in tablets and computing, and the company was unable to reverse its slumping services segment, where comps declined 10.3 percent on lower extended warranty attachments and fewer mobile warranty claims.
Joly said the comp decline still beat the industry’s 5.3 percent drop in CE sales year over year (excluding mobile, gaming and entertainment) as reported by The NPD Group, and reminded investors that the CE business “is subject to product cycles,” and that Best Buy is positioning itself “to capitalize on key technology waves and customer-experience opportunities.”
Walmart and sister chain Sam’s Club reported soft CE sales last quarter, due in part to delayed West Coast port shipments. In a pre-recorded discussion of the company’s first-quarter results, covering the three months ended April 30, Walmart U.S. president/CEO Greg Foran said port congestion related to the recent labor dispute hurt in-stock positions of TVs and other CE products.
The discounter’s media and electronics business was also pressured by what Foran called “industry contraction,” as well as the shift from physical to digital media. Total comp sales for Walmart U.S. edged up 1.1 percent, reflecting a 1 percent increase in traffic, flat average ticket and a 20 basis-point increase in ecommerce sales. The latter reflects a more than 100 percent increase in mobile traffic and higher conversion rates for that channel.
The port delays also impacted TV sales at Sam’s Club, which reported an overall comp decline for its technology and entertainment business. TV sell-through picked up later in the quarter as the delays decreased, president/CEO Rosalind Brewer reported, and audio sales were strong due to new headphones and soundbars.
For the quarter, parent company Wal-Mart Stores reported flat sales of $114.8 billion and a 7 percent decline in net income, to $3.3 billion, as the retailer raised store-level salaries and added back nearly 8,000 Walmart U.S. department managers to improve the shopping experience – a $1 billion investment – and continued spending on investment in e-commerce infrastructure.
The fruits of the latter include a more simplified checkout process now being rolled out on walmart.com that’s based on the company’s Pangaea global technology platform. Part of the platform provides “a better experience on mobile devices,” noted Wal-Mart Stores president/CEO Doug McMillion, which is critical as “mobile is increasingly the driver of our e-commerce business.”
Thankfully for the chains, the protracted labor dispute at 29 West Coast ports finally settled at the end of May. Members of the International Longshore and Warehouse Union (ILWU) voted overwhelming to ratify a new five-year contract that provides 20,000 good-paying jobs and maintains current benefits.
While Walmart U.S. opened more than 40 new locations and relocations in the quarter, hhgregg said it would reduce its distribution footprint and reassess its store count.
Higher expenses and lower sales led to a $25.2 million loss for hhgregg in its fiscal fourth quarter. The loss, covering the three months ending March 31, steepened from a year-ago loss of $7.2 million, but narrowed from the $87 million loss recorded last quarter.
The results were driven by persistent sales declines for which the multiregional CE, appliance and furniture chain has been unable to apply the brakes. Net sales slid 9.8 percent for the period, to $485.6 million, and comp-store sales decreased 10 percent.
To help turn the tide, president/CEO Dennis May said the company is focused on improving its cost structure and reversing the sales slide. To rein in costs, the chain will “be working to selectively rationalize our footprint,” he said, including two end-of-lease stores that were closed last quarter. hhgregg’s footprint spans 226 stores in 20 states, along with supporting spoke-and-wheel distribution centers, the result of a multiyear build-out as the chain pursued national ambitions.
“We don’t anticipate significant store closings,” May told investors on an earnings call. Instead, the company will continue to evaluate its real estate and make adjustments accordingly.
And speaking of beleaguered retailers, RadioShack’s sale was OK’d by a federal bankruptcy court, a decision that cleared the way for the 1,700 RadioShack stores acquired by Standard General in an earlier bankruptcy auction to continue bearing their 94-year-old trademark. In his decision, Judge Brendan Shannon found that RadioShack was within its rights to alter the bidding procedure as it saw fit, Reuters said. Still unclear, however, is the fate of some 800 independent RadioShack franchise owners whose contracts were included in the auction and who filed their objection in court.
In a web posting on TWICE.com, Kansas franchisee and buying group founder Frank Beer observed that “the fate of these fine independent businesses continually gets forgotten in the carnage of the [RadioShack] bankruptcy. As a group they would be one of the largest CE chains in the country. And over the past years they have been the one bright spot in the RadioShack world.
“Sad that they are collateral damage in the situation,” he wrote. “They deserved much better and are fighting for their futures. — Additional reporting by Lisa Johnston”
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