Best Buy Tumbles After Predicting Sales Slump in First Half

Best Buy Inc., the largest electronics retail chain, fell the most in almost a year after warning that price pressure and sluggish demand will lead to a sales slump in the first half of the year.

Deflationary pricing, weak demand for some categories of electronics and fewer people buying extended warranties all threaten to weigh on results, the Richfield, Minnesota-based company said in a statement today. Sales in the first half will range from being little changed to dropping by a low single-digit percentage, Best Buy said.

The dour outlook follows a 2.6 percent gain in U.S. same-store sales for the holiday season, which the company credited to customers snapping up big-screen TVs and phones. Its multichannel strategy, which lets customers order items online and pick them up in the store, also helped bolster sales. Still, the allure of new products may not extend into the coming year, the company said.

The mobile-phone and home-theater gains “were partially driven by the excitement around high-profile products and will not likely continue at holiday levels,” Chief Financial Officer Sharon McCollam said in the statement.

Best Buy fell 14 percent to $34.30 at the close in New York, the biggest one-day drop since Jan. 16, 2014. The shares declined 2.3 percent last year.

Cost Cutting

Chief Executive Officer Hubert Joly, who cut expenses after taking the CEO job in 2012, has been working on reviving Best Buy’s sales amid steep competition from online and big-box rivals. Best Buy has been giving more floor space to top electronics brands like Samsung Electronics Co. and Sony Corp. as well as promoting ultra-high-definition TVs. Last year, the retailer announced it was working with GoPro Inc. to add more of its video cameras to stores.

The holiday growth compared with a 0.9 percent decline in the year-earlier period.

The company said it’s working to overcome the industry challenges by improving customers’ experience, boosting sales incentives and making other investments in growth opportunities.

“To win against this backdrop, we have to lead -- which requires investing now,” Joly said today.

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