Best Buy's first quarter results were better than expected, but were helped by an extra selling week and lower tax rate. In other words, Best Buy remains a work in progress.
The company reported first quarter earnings of $255 million, or 64 cents a share, on revenue of $11.61 billion, up 2 percent from a year ago. Non-GAAP earnings were 72 cents a share.
Wall Street was expecting earnings of 59 cents a share on revenue of $11.52 billion.
The results, however, aren't what they seem. Best Buy got a boost from an extra selling week in the quarter and a lower tax rate.
Piper Jaffray analyst Peter Keith said in a research note that Best Buy's quarter was a "modest disappointment." Indeed, same store sales were down 5.3 percent and Keith was expecting a drop of 4 percent in same store sales.
Best Buy's best performing categories were appliances, computing, and mobile phones. Sales of entertainment and consumer electronics fell. Online sales were up 20 percent, which was a positive.
In a statement, Best Buy interim CEO Mike Mikan outlined the retailer's challenges.
Best Buy is in a turnaround, and the strategic priorities we laid out at the beginning of the year are just the first phase of the changes to come. We know we have to better adapt to the new realities of the marketplace, and we are creating a long-term plan designed to make Best Buy more relevant with customers and position the company for sustained, profitable returns in the years ahead.
On a conference call, Mikan elaborated on Best Buy's challenges.
We are operating in an economy without boundaries, one that has been transformed by the digital revolution and is more open and transparent than ever before. Neither consumers nor companies are defined by the roles and limitations that seemed so clear just a decade or so ago. Armed with information and choice, consumers shop differently today. The annual rate of growth of e-commerce transactions is far outstripping traditional retail sales. Consumers have needs and preferences that are new and changing rapidly. Today, they need virtual product and services as much if not more than they need hardware. And businesses are under pressure to respond to those changes, to connect with consumers whether they are online or in the store and to meet these new needs and preferences. The changes have created risks and dislocation.
Mikan said the broader goal for Best Buy was to never be caught flat-footed again.
Best Buy reaffirmed its previous fiscal 2013 outlook, which calls for non-GAAP earnings of $3.50 a share to $3.80 a share. That outlook excludes restructuring costs.