A weak second quarter for Best Buy Co. sent its stock down 3 percent as the Richfield, Minn.-based retailer looks for ways to get smaller and more profitable.
Revenue at stores open for at least 14 months was down 3.2 percent compared with a year ago, a key metric analysts watch to gauge a retailer's health. Best Buy's profits missed Wall Street's adjusted forecast by 11 cents per share, and the company suspended fiscal guidance and share repurchases for fiscal 2013 to give newly named CEO Hubert Joly the flexibility to start fresh.
While analysts on a conference call this morning were hoping for some more insight into what the company's turnaround plan entails, interim CEO Mike Mikan said it wouldn't be fair to Joly to discuss the details today. Hubert will inherit the advance work done on the turnaround plan, Mikan said, as the company has examined ways to expand services while reducing costs and cutting square footage at big-box stores.
"I, along with the full executive team, will do everything we can do to provide a smooth transition," Mikan told analysts.
Best Buy's China and Europe markets "are facing enormous difficulties," and conditions in the U.S. are soft, Mikan said. Consumers are cautious and industry sales appear to be dampened by buyers holding back as they wait for new technology releases later this year. That includes the Windows 8 operating system, new smartphones, e-readers and gaming products.
While the company said it saw strong growth in sales of tablet computers, mobile phones and appliances, there was weakness in gaming products, televisions and notebook computers.
The decision to suspend fiscal guidance was made because of variability in consumer demand, the uncertainty of how big an influence product launches will have on sales, and the desire to give Joly time to understand the business and "decide where he wants to take the company," said Jim Muehlbauer, Best Buy's chief financial officer.
Asked about the mood at the company as it faces a number of challenges, Mikan said that "things playing out in the public marketplace are a distraction," an apparent reference to the ongoing conflict with founder and former board member Richard Schulze, who wants to take the company private. "But everybody is focused on improving performance," Mikan said, and the announcement of a permanent CEO provides additional stability. "We're in positive territory with respect to employee engagement," he said.
Best Buy's stock was trading near $17.50 per share Tuesday morning, though it was below $17 in early trading, a 6 percent decline.
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