Best Buy lowers outlook as mobile sales continue to shrink
Shrinking mobile sales forced Best Buy to lower sales and profit estimates for its current quarter.
Best Buy said sales of computing and mobile devices -- a category which accounts for 43 percent of the company's total U.S. revenue -- fell 6.8 percent.
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The consumer electronics retailer now expects Q1 revenue of $8.25 billion to $8.35 billion and profit of 31 cents to 35 cents per share. Analysts had targeted revenue of $8.45 billion, or 39 cents per share.
Best Buy's shares fell around 3 percent in early trading Thursday.
The company has had a longtime love/hate relationship with the mobile industry -- when consumers are buying more phones, Best Buy's revenues increase, but when sales dry up, revenue takes a hit. Unfortunately for Best Buy, the company is at the mercy of consumer and manufacturer upgrade cycles and has few products to fall back on when mobile slows down.
Best Buy expects revenue declines to continue for the first half of the year, followed by growth in the second half, said CFO Sharon McCollam.
"In this context, we are targeting flat domestic Domestic revenue for the full year ... but recognize that it will be challenging without a strong mobile cycle," McCollam said in the earnings release.
E-commerce turned out to be one of the few bright spots in Best Buy's quarter. The online channel accounted for nearly 16 percent of Best Buy's U.S. revenue, increasing 14 percent.
See Also: Best Buy: Mobile device sales slowed during holidays
Best Buy CEO Hubert Joly said the company plans to focus on multichannel capabilities for both the short and long term, as well as its in-store consumer support efforts, as part of its ongoing revenue strategy.
"We expect to accelerate our revenue and operating income growth by taking advantage of opportunities provided by ongoing technology innovation and the need customers have for help," he said in prepared remarks.
Best Buy also said it would buy back up to $1 billion in shares over the next two years and offered a special dividend of 45 cents per share.
As for the rest of Best Buy's earnings report, the numbers actually weren't that bad. The retailer posted net income of $479 million, or $1.40 per share.
Non-GAAP earnings were $1.53 per share on revenue of $13.62 billion. Wall Street was looking for earnings of at least $1.39 a share on revenue of $13.61 billion.