Best Buy Co., the world’s largest consumer-electronics retailer, had its credit ratings cut at Standard & Poor’s and Fitch Ratings after posting a $10 million third-quarter loss amid weakening store sales.
The rating was lowered one step to BB, the second level below investment grade, from BB+, Jayne Ross, an analyst at S&P in New York, said in a note today. Fitch downgraded Richfield, Minnesota-based Best Buy two levels to BB-, the third step into speculative grade, from BB+, according to a note from Monica Aggarwal, a Fitch analyst.
Chief Executive Officer Hubert Joly is working to improve customer service as customers defect to Amazon.com Inc. and Wal-Mart Stores Inc. Same-store sales fell 4.3 percent last quarter, more than the 3.3 percent drop estimated by analysts. The net loss for the period compared with profit of $156 million a year earlier.
“While the new management team has outlined the key problems the company faces and acknowledges that many are self-inflicted, it will take some time for the CEO and senior management team to full formulate its turnaround strategy and execute it,” Ross said in the statement. “We will not begin to see any tangible results until the second half of fiscal 2013 at the earliest.”
Both firms have a negative outlook on Best Buy, meaning the rating could be reduced further.
The company’s $650 million of 5.5 percent notes due March 2021 fell to a record low of 84.75 cents on the dollar to yield 8.1 percent at 11:17 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Best Buy shares fell 3.3 percent to $11.57 at the close in New York today after plunging 13 percent yesterday, when Best Buy reported its fiscal third-quarter results.