Best Buy's quarter gets lump of coal: Consumer electronics sales weak

Best Buy's quarter gets lump of coal: Consumer electronics sales weak

Summary: Weak television and consumer electronics sales conspired to crush Best Buy's fiscal third quarter.

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Weak television and consumer electronics sales conspired to crush Best Buy's fiscal third quarter.

Best Buy reported fiscal third quarter earnings of $217 million, or 54 cents a share, on revenue of $11.89 billion. Wall Street was expecting earnings of 61 cents a share on revenue of $12.45 billion.

What happened? Best Buy said sales of TVs and mobile computing products---notebooks---came in lower than expected. Indeed, same store sales were down 3.3 percent in the third quarter. In the U.S. same store sales at Best Buy were down 5 percent.

A low double-digit same store decline in TVs, entertainment hardware and software crimped Best Buy's quarter. Mobile phone and tablet computer sales were decent, but overall Best Buy struggled. Competition also hampered Best Buy as the company competes with Wal-Mart and other electronics retailers such as HH Gregg, which has taken over many locations formerly owned by Circuit City.

Best Buy said in a statement:

The company estimates that its domestic market share declined 110 basis points versus the comparable period last year for the three months ended October 31, 2010. The decline was driven primarily by declines in TVs, mobile computing and gaming software. Based on fiscal year-to-date trends, the company now estimates that its domestic market share will decline for the full fiscal year as compared to the prior fiscal year.

Some key highlights from the Best Buy conference call:

  • CEO Brian Dunn said online sales were up 7 percent from a year ago and 40 percent of sales are for in-store delivery. Nevertheless, that rate of growth seems to lag the likes of Amazon.

  • E-reader sales and mobile sales are solid. Dunn said:

Upgrade checks were a primary driver of our Best Buy Mobile business, because so many customers have no idea that they can upgrade to a great new phone for little or no out-of-pocket expense for the hardware. We believe that Best Buy Mobile continues as a huge growth opportunity for us and will continue to contribute positively to our earnings. We estimate we have only about 5% market share and we plan to more than double that share over time. We also saw very high demand for e-readers. This is a growing category for us. We sell all three major e-reader brands and sales were very strong. This is noteworthy, because it illustrates customers' appetite to be connected and to engage in new technology.

  • Best Buy decided not to play ball in the cheap TV space and is paying the price. LED TV is selling well, but 3D and connected TVs aren't. Dunn said 3DTV and connected TVs are "a little bit slower than the industry wanted it to be."

Best Buy projected fiscal 2011 earnings of $3.20 to $3.40 a share. Wall Street was expecting $3.59 a share.

Here's a look at the moving parts:

Topics: Hardware, Enterprise Software, Mobility

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10 comments
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  • RE: Best Buy's quarter gets lump of coal: Consumer electronics sales weak

    That didn't stop me from getting a TV for cheap from there.
    Loverock Davidson
    • I've got one

      @Loverock Davidson
      from HHGreg that beat Best Buy's price.
      I think BB's deals were not as good this year.
      Linux Geek
    • RE: Best Buy's quarter gets lump of coal: Consumer electronics sales weak

      @Loverock Davidson
      Me likewise. They had the killer deal on a 60" Sharp a few weeks back. HHGreg didn't have the same model and nothing close deal-wise.

      Perhaps Best Buy sells too many products.

      It's nice to see competitive powers at work.
      Schoolboy Bob
  • What a suprise!

    Corporate America has finally killed off the affluent middle-class. They're all wandering around trying to figure out why their sales are down and nobody is buying. Here's a clue:

    WE HAVE NO MONEY!

    See, here's how it's supposed to work:

    1. Acme Widget hire Bob at a decent salary with benefits.

    2. Bob takes his paycheck and buys food, clothes, lodging, and toys.

    3. A good time is had by all.
    But, you got greed, and , here's what happened:

    1. Acme Widgets fires Bob and hires some Chinese children to build Widgets very cheaply.

    2. Bob gets a job at McDonalds which pays half of what his job with Acme Widget paid.

    3. Bob still buys food, clothes and heat, but HE STOPPED BUYING TOYS.

    It's not much more complicated than that, you idiots.
    trickytom3
    • RE: Best Buy's quarter gets lump of coal: Consumer electronics sales weak

      @trickytom3
      Correct. It's not rocket science.
      hoaxoner
    • A tad harsh,but true. :D

      @trickytom3
      I started in summer 2009. Discretionary spending is pretty much nil. I have seen no improvement in the economy since then and we are still awaiting the massive hangover as a country.

      Your point #3, we have been on the "free ride" now for a couple of decades. In general though, we simply don't make anything anymore. We have had a trade deficit of about $30-$40B/month since forever. This year alone, you can see it here...
      http://www.americaneconomicalert.org/ticker_home.asp
      $463B trade deficit this year. Guess what, when you ship $4T overseas away from a country every 10 years, it MIGHT affect you in the long run.

      Oh well, it's a shame that Best Buy only kept (after operating expenses) $217M and only shipped $8 or $9B overseas.

      TripleII
      TripleII-21189418044173169409978279405827
  • RE: Best Buy's quarter gets lump of coal: Consumer electronics sales weak

    Agree with this for the 99'rs. Also those that were able to (or think they were able to) afford these things have already bought them
    edkollin
  • Best buy has built...

    about 4 new stores in my area over the last two or three years. The few stores they had before looked busy most of the time, now, not so much.
    oncall
  • Thats ok guys and girls

    Thats ok guys and girls,our government will bail them out with money they took from us in taxes or just flat out printed for them.
    Stan57
  • RE: Best Buy's quarter gets lump of coal: Consumer electronics sales weak

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