Best Buy's earnings take a dip
Fiscal 2010 first-quarter income drops 15 percent to $153 million, versus $179 million reported a year ago. The decline is largely associated with restructuring charges.
Electronics megaretailer Best Buy reported on Tuesday quarterly earnings of $153 million, or 36 cents per diluted share. Results were 15 percent lower than the $179 million, or 43 cents per diluted share, earned in the year-ago quarter ended in May.
Sales for the quarter--the company's first of fiscal 2010--were higher, though, jumping 12 percent year over year, to $10.1 billion from $8.9 billion.
Best Buy attributed the bulk of the earnings decline to restructuring charges, which reduced first-quarter income by $25 million, or 6 cents per diluted share. The company was hit by costs from changes to its U.S. store model and a shake-up of its European division.
Minus the restructuring charges, earnings were $178 million, or 42 cents per diluted share. This contrasts with its previous quarter, which saw earnings of $570 million, or $1.35 a share.
Analysts had expected income excluding charges of only 34 cents per share.
"Our first-quarter results reflect strong execution of our strategy in a difficult consumer environment," said Jim Muehlbauer, Best Buy's executive vice president of finance and chief financial officer. "Once again, our teams grew market share and improved the gross profit rate while maintaining a disciplined approach to expense management."
Best Buy's sales were certainly helped by the closure of Circuit City's retail stores. But they also were boosted by stronger growth in Best Buy Europe and gains from 185 new stores over the past year.
The company is upbeat about the year ahead, projecting more robust earnings for 2010 overall.
"We are pleased to report that the year is off to a good start, and we remain focused on delivering our annual earnings guidance of $2.50 to $2.90 per diluted share, excluding restructuring charges," said Muehlbauer. "Given the limited visibility to consumer spending in the back half of the year, along with the fact that a majority of the company's earnings are derived from the holiday selling season, it's prudent to maintain our original guidance at this point."
Best Buy does face some uncertainty. Brian Dunn will be taking the CEO reins this summer. Like other brick-and-mortar retailers, the company faces stiff competition from online rivals, including the new Circuit City Web site.