- Holiday revenue declines for third time in four years
- CEO says declining demand for phones weighed on results
Best Buy Co. suffered its worst stock decline in a year after reporting weak holiday sales, hurt by sluggish demand for mobile phones and broader slump in the electronics industry.
Same-store sales fell 1.2 percent in November and December, the Richfield, Minnesota-based company said in a statement Thursday. That compares with a 2.5 percent gain in the year-earlier period and marks the company’s third decline in four years.
Fewer customers upgraded their phones during the period, weighing on sales. Still, the retailer outperformed the rest of the industry, which faces steeper declines, Chief Executive Officer Hubert Joly said in the statement. The company also saw strength in health products, wearable devices, home theater and appliances, he said.
“We grew the business, excluding mobile phones, in a backdrop with a retail industry that was tough,” he said in a call with reporters.
The stock dropped fell 9.7 percent to $26.43 at the close in New York, marking the biggest plunge since Jan. 15, 2015. The shares were down 22 percent last year.
Though Joly has made progress in cutting costs, investors are getting increasingly impatient about the chain’s inability to revive growth. The CEO, now in the fourth year of a turnaround plan, has shored up profit by selling off foreign divisions. But consistent sales increases have yet to materialize.
Taking the holiday results into account, the full quarter’s sales will decline about 4 percent. The chain also expects its operating margin to narrow by 0.15 to 0.30 of a percentage point in the period, which runs through the end of this month. It had previously forecast a decrease of as much as 0.45.
Joly said innovation drives the electronics market and that some brands, like GoPro, didn’t have new products this Christmas season. Emerging categories such as drones, virtual reality and maybe even clothing infused with technology will help the market, he said.
Best Buy and other retailers entered the holiday season warning that the electronics market in the U.S. was weak. Even so, key categories tracked by research firm NPD Group Inc. fared even worse than expected, Best Buy said on Thursday.
Half of Best Buy’s earnings typically come in the fourth quarter, so Wall Street closely watches its holiday sales. After same-store sales fell during the 2013 holidays, the stock sank by a third in two days. The shares also took a hit after the 2011 Christmas season when revenue missed estimates. That performance added to concerns about then-CEO Brian Dunn, who was later ousted.