Jan. 16--Best Buy shares plunged 28 percent in morning trading Thursday after reporting holiday sales far weaker than Wall Street expected.
The electronics retailer also warned there'd be deeper cuts still to come as it tries to control costs. Last year, Best Buy laid off 400 corporate employees at its Richfield headquarters; the year before, it closed six of its big-box stores in Minnesota and laid off hundreds more.
Amid fierce price wars, Best Buy said holiday sales declined at its U.S. stores, with same-store sales falling 0.9 percent. U.S. online sales grew by 23.5 percent during the holiday period, but didn't come close to making up the shortfall from its stores.
Best Buy shares were crushed on Wall Street, as investor enthusiasm for the company's turnaround story evaporated. At mid-morning, shares were trading down $10.46 cents, or 28 percent.
Stock in the Richfield-based retailer had soared in 2013 as Wall Street embraced the story of Best Buy's recovery. Best Buy says the turnaround remains intact, although CEO Hubert Joly conceded, "We've hit a speed bump."
But the Wall Street exodus told another story, suggesting that the turnaround could be bloodier, longer and more difficult than investors in 2013 expected.
"Without a doubt, the momentum that Best Buy had is over, and I don't know whether you can recover," CNBC stock picker Jim Cramer said on the air Thursday.
Joly said heavy discounting by rival merchants led Best Buy to respond by lowering its own prices in order to defend its market share.
"This investment in pricing did come with a higher-than-expected cost," Joly said in a statement. He later added that the holiday price wars "did not result in higher industry demand and had a deflationary impact on our revenue."
U.S. holiday revenue, both in-store and online, declined 1.5 percent from last year. It totaled $9.75 billion. The bright spot was online sales, which grew to $1.3 billion, up 23.5 percent.
International holiday sales fell 8 percent, a reflection of store closures in Canada and China. International same-store sales rose 0.1 percent.
In addition to Joly, Best Buy's founder and ex-chairman Richard Schulze issued a statement as well, expressing patience and support for the company's path.
"Best Buy is on this journey and in this business to win, acquire and retain new and existing customers," Schulze said. "I have complete faith in the long-term strategy and I am confident that management is taking the steps required to win and position the company for a successful future."
That strategy, however, entails what Joly calls an urgency to "more quickly and more deeply lower our cost structure."
Last year, Joly's initial round of cost-cutting led to the loss of some 400 jobs at the Richfield corporate headquarters. On Thursday, Joly didn't specify which areas he intended to cut further, although he did say he intended to "reinvigorate and grow our Geek Squad services business."
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Original headline: Best Buy shares plunge on holiday sales; deeper cuts planned
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