Best Buy Co. (BBY) raised its quarterly dividend for the first time in two years after Chief Executive Officer Hubert Joly cut costs and improved cash flow, signaling that a comeback is under way.
The dividend, boosted by 12 percent to 19 cents a share, would be payable on Oct. 2 to shareholders of record as of Sept. 11, the Richfield, Minnesota-based company said today in a statement. The increase exceeded the 18 cent estimate, according to data compiled by Bloomberg.
Joly, who took over as CEO in September 2012, has been reducing expenses and renovating stores to include new spaces for vendors such as Samsung Electronics Co. He’s set a goal of trimming $1 billion in annual costs and piled on discounts while making a permanent a policy of matching competitors’ prices in an effort to ward off online rivals.
“We see it as a strong indicator that management is increasingly confident about the trajectory of the company’s ongoing recovery,” Alan Rifkin, an analyst for Barclays Plc in New York, wrote in a note to clients. Provided stabilization continues, “Best Buy will be well-positioned to begin repurchasing shares by early 2015.”
Rifkin rates the shares an equivalent of a buy.
Best Buy, the world’s largest consumer-electronics retailer, rose 2.4 percent to $29.49 at the close in New York. The stock has declined 26 percent this year.
“Our decision to increase the amount of cash we are returning to shareholders is indicative of our improved cash position and our confidence in the cash-generating power,” Joly said in today’s statement.
While Joly has shrank the size of quarterly sales declines, the retailer posted a 3.3 percent drop in revenue last quarter, the ninth straight quarterly decrease and also trailed analysts’ estimates. The company blamed part of its inability to revive sales on a lack of innovation in the electronics industry.
Still, adjusted earnings per share beat analysts’ estimates and net income was $461 million compared with a loss of $81 million a year earlier. Last month, Joly said the company had cut $95 million more in annual costs in the first quarter.
Best Buy last announced a dividend increase in June 2012, when the company raised it to 17 cents from 16 cents. The retailer is holding its annual shareholder meeting today.
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