Best Buy Co. Chief Executive Officer Brian Dunn said the world’s largest consumer-electronics retailer, which cut its full-year earnings forecast today, is contending with “volatile and uncertain” consumer spending.
“The consumer is making very measured choices,” Dunn, 51, said in a telephone interview today after the Richfield, Minnesota-based retailer reported a 30 percent decline in second-quarter profit. “I don’t think it’s a year where someone is going to buy a TV and a tablet and a new smartphone and go to Disneyland.”
Shoppers are cutting back on purchases of electronics amid slumping consumer confidence, leading to the fifth straight quarterly decline in same-store sales at Best Buy stores open at least 14 months. Dunn is working to bolster the retailer’s online presence as rivals including Amazon.com Inc. and Wal-Mart Stores Inc. lure customers.
Best Buy declined $1.61, or 6.5 percent, to $23.35 at 4 p.m. in New York Stock Exchange composite trading. The shares have fallen 32 percent this year, compared with a 3.4 percent decline for the Standard & Poor’s Consumer Discretionary Sector Index.
“Best Buy is on a path to becoming a smaller and less profitable company, despite management’s robust efforts,” Colin McGranahan, an analyst at Sanford C. Bernstein & Co. in New York, wrote today in a note to clients. He rates the shares as “market-perform.”
Net income in the quarter ended Aug. 27 fell to $177 million, or 47 cents a share, from $254 million, or 60 cents, a year earlier, the company said today in a statement. Analysts projected 53 cents, the average of 21 estimates.
Best Buy said that profit this year will be as much as $3.45 a share, excluding the impact of share buybacks, down from an earlier forecast of as much as $3.55.
U.S. payrolls were unchanged in August and the unemployment rate held at 9.1 percent, signaling the economy is at risk of stalling two years after the end of the last recession. Employers said they plan to slow the pace of hiring in the fourth quarter, Manpower Inc., the second-largest provider of temporary workers, said today.
Same-store sales fell 2.8 percent, matching the median of seven analysts’ estimates. Comparable-store sales of mobile phones fell 5 percent in the quarter because of a lack of new devices compared to a year earlier.
Second-quarter sales of $11.3 billion were little changed, according to the statement. That missed the $11.5 billion average of analysts’ estimates compiled by Bloomberg.
The company said it will buy back $1.5 billion in shares this year.
“The buyback is putting a Band-Aid on declining same store sales ahead of what’s probably going to be an extremely promotional holiday season in consumer electronics,” John Tomlinson, an analyst at ITG Investment Research in New York, said today in an interview.