Best Buy Co., the largest U.S. consumer-electronics retailer, reported first-quarter profit that exceeded analysts’ estimates, helped by demand for smartphones.
Net income fell 25 percent to $158 million, or 46 cents a share, from $212 million, or 53 cents, a year earlier, the Richfield, Minnesota-based company said today in a statement. Profit excluding restructuring costs totaled 72 cents a share. Analysts projected 59 cents, the average of 22 estimates compiled by Bloomberg.
Best Buy lured customers with discounts on smartphones, part of former Chief Executive Officer Brian Dunn’s efforts to compete with Amazon.com Inc. Lower demand for televisions and notebook computers reduced comparable-store sales in the quarter by 5.3 percent as the company seeks Dunn’s replacement following his resignation last month.
“It would be a stretch to say Best Buy is on trajectory to beat and raise guidance,” Brian Sozzi, an independent analyst in New York, wrote today in a note. He rates the shares as underperform, equivalent to a sell rating, and said declining comparable-store sales were “worrying.”
Revenue in the quarter, which included an extra week, increased 2.1 percent to $11.61 billion, exceeding the $11.5 billion average of 19 analysts’ estimates compiled by Bloomberg. Excluding the extra week, revenue declined 4.3 percent, Best Buy said.
The company reaffirmed its full-year profit forecast of $3.50 to $3.80 a share.
Best Buy rose 1.6 percent to $18.46 at the close in New York. The shares have declined 21 percent this year.
Dunn, 52, resigned last month amid a board probe that found he had an inappropriate relationship with a female employee. The company said yesterday it selected executive-search firm Spencer Stuart to conduct its hunt for a new CEO after naming director Mike Mikan as interim chief. The search may take as long as nine months, Best Buy said in April.
Mikan said on a conference call today that the company plans to unveil its turnaround plan this summer, adding that the retailer was “not prepared” for the rise of online competition in recent years. Best Buy is pursuing steps outlined by Dunn in March, which includes opening more mobile phone outlets while accelerating cost cuts and improving its website, he said.
“Best Buy is not performing up to its past standards,” Mikan said. “It does not mean we are in any danger of going out of business.”
Last week, the company said founder Richard Schulze would step down as chairman after failing to inform the board of allegations about Dunn’s conduct.
In March, Dunn announced plans to close 50 big-box stores in the U.S. and eliminate 400 corporate and support jobs as part of $800 million in cost cuts in the next three years.
“Ultimately we believe the company needs a greater focus on cost reductions and returning capital to shareholders and, strategically, a much greater focus on exclusive products that can’t be sold by Internet distributors,” Scot Ciccarelli, an analyst at RBC Capital Markets in New York, said in a note May 17. He rates Best Buy as sector perform, which equates to a hold rating.