Online Shopping Puts A Big Dent In Best Buy Results (BBY)

Best Buy has announced disappointing second quarter results and lower than expected revenue. During the quarter, Best Buy’s revenue fell 4 percent to $8.89 billion, lower than the $8.99 billion in revenue that analysts had expected. This is the third straight quarter of lower than expected revenue for the company. Net income dropped 45 percent to $146 million, or 42 cents per share.

Weak sales in the consumer electronics market and tougher competition from retailers that primarily operate online are two of the factors cited as reasons for the disappointing results. The company expects same-store sales to fall by a low single-digit percentage during the second half of the year. In the second quarter, same-store sales decreased 2.7 percent. This was more than the 2.2 percent decline predicted by Wall Street analysts. Same-store sales for stores in the United States declined 2 percent during the same period.

As the largest consumer electronics retailer in the United States, the results reported by Best Buy may signal a trend throughout the rest of the consumer electronics industry. Industry-wide, sales of consumer electronics fell 2.5 percent during the same period, according to NPD Group’s Weekly Tracking Service. To make up for declining sales, Best Buy has been laying off employees and closing underperforming stores.

Deeper discounting of its merchandise will also weigh on the results for the second half of the fiscal year. Discounting in Canada and China and increasing sales of lower-margin items online will continue to put pressure on Best Buy’s operating margins for the near future. The company’s operating margin decreased from 4.5 percent to 2.7 percent. Gross margins for the company have not increased in the last 14 quarters Best Buy’s agreement to match prices from other retailers has been viewed by some as a mistake as the discounts have eroded profits for the company.

Receive News & Ratings Via Email - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings with our FREE daily email newsletter.