By Mae Anderson Associated Press
NEW YORK — Struggling Best Buy Co. reported another dismal quarter on Tuesday, recording a third quarter loss and continued sales slump just as the crucial holiday season revs up.
Adjusted for restructuring charges, it earned 3 cents per share, well below analysts’ expectations. The news sent shares down more than 12 percent in midday trading to their lowest level in more than two decades.
“Best Buy’s third-quarter financial performance was clearly unsatisfactory,” said CEO Hubert Joly, the turnaround expert tapped to lead Best Buy in August.
The electronics chain is trying to reverse a yearslong decline in its business as competition from online stores and discounters increases, and consumers’ tastes shift from more profitable items like TVs and desktop computers toward less profitable smartphones and tablets.
In addition, it’s facing a growing number of consumers who are “showrooming,” going to Best Buy stores to check out merchandise but buying it elsewhere. That is a challenge for the retailer.
Meanwhile, co-founder and former chairman Richard Schulze is mulling a bid for the company.
Last week at an analyst meeting, Joly outlined a plan to improve results via beefing up customer service and revamping stores while at the same time cutting overhead and supply-chain costs. He has also restructured top management and brought in a new CFO.
“The results we are reporting today only strengthen our sense of urgency and purpose,” Joly added.
But the quarterly results show Best Buy has a long way to go to turn things around.
The Minneapolis company reported a loss of $10 million, or 3 cents per share, for the three months ended Nov. 3. That compares with net income of $156 million, or 42 cents per share in the prior year period.
Excluding one-time items, earnings totaled 3 cents per share. Analysts expected earnings of 13 cents per share, according to FactSet.
Revenue fell 4 percent to $10.75 billion from $11.15 billion but still matched analysts’ expectations.
Revenue in stores open at least one year continued to slide, down 4.3 percent for the quarter. The measure is an important gauge of a retailer’s financial health because it excludes results from stores that open or close during the period.
Sales growth in mobile phones, appliances and tablets and e-readers was offset by weakness in notebook computers, video games, digital cameras and TVs.
Shares fell $1.67, or 12.2 percent, to $12.08 in midday trading after falling as low as $11.74 in earlier trading. That is the lowest since November 1988, according to FactSet.
The quarter had some quarter-specific issues that hampered results, Joly said, including customers delaying purchases ahead of new launches like the new Windows 8 operating system and several new smartphones and tablets.
In addition, the company faced higher costs for training employees and executive transition expenses.
“We do not believe that the rate of decline that Best Buy experienced in the third quarter can be extrapolated in any way,” he said in a call with analysts.
Best Buy also outlined its plans for a successful holiday season, including empowering its floor staff with the ability to match online prices and giving extra compensation to the best performing workers.
But ITG analyst John Tomlinson said results for the fourth quarter will be key to see if Joly’s plans for the company will pay off.
“He’s saying the right things about what Best Buy’s problems are, but the devil is in the details,” Tomlinson said. “Until you actually see the sales lift and benefit from those investments, most investors are going to take a wait-and-see-type approach.”