Best Buy Co. Inc. (NYSE: BBY) reported a 26 percent drop in fiscal first-quarter profit due largely to higher restructuring costs. But earnings topped Wall Street's expectations and sent the company's stock higher.
The country's largest specialty electronics seller has been working on a turnaround, facing stiff competition from online vendors and the need to update an increasingly outmoded big box model. Restructuring charges for the quarter rose to $127 million compared to $4 million in the same quarter last year.
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, Mike Mikan, interim CEO said. Mikan took over last month after veteran CEO Brian Dunn was forced out after disclosure of an inappropriate relationship with a female employee.
Best Buy's shares closed Tuesday 29 cents up to $18.46, but the shares are still trading at only about half their 52-week high of $32.85.
The company is currently closing some of its large retail outlets and opening 100 smaller Best Buy Mobile stores as part of its effort to trim $800 million in operating costs. Forty-one of the 50 stores the Richfield, Minn.-based retailer plans to close as part of the restructuring plan have been shuttered as of May 12.
Net income for the quarter ended May 5 was $158 million, or 46 cents a share compared with $212 million, or 53 cents a share, last year. Excluding the hit taken by the restructuring costs, the company earned 72 cents a share, beating the 59-cent estimate by analysts polled by FactSet.
Revenue rose 2 percent to $11.6 billion from $11.36 billion a year earlier.
One bright spot: Best Buy said online revenue jumped 20 percent. Higher sales of hand-held devices such as tablets and electronic readers as well as appliances more than offset declining sales of televisions, digital cameras, computer games and laptops. Mobile phone sales grew 13 percent.
Still, Best Buy faces increasing competition from online sellers headed by Amazon.com (Nasdaq: AMZN) and leading electronics suppliers headed by Apple (Nasdaq: AAPL) and Dell (Nasdaq: DELL), which have huge online retail operations.
A slowdown in international sales was a major factor in the decline in profit.
As expected, the international segment operating loss was driven primarily by lower revenue in Europe and China and increased competitive conditions in Europe, the company said.