Here are excerpts from their earnings release:
| FISCAL SECOND QUARTER PERFORMANCE SUMMARY |
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| (U.S. dollars and square footage in millions, except per share and per square foot amounts) |
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| Three Months Ended |
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| Aug. 4, 2012 |
July 30, 2011 |
Change | |||
| Revenue | $10,547 | $10,856 | (3%) | ||
| Comparable store sales % change1 |
(3.2%) | (3.8%) | 60bps | ||
| Gross profit as % of revenue | 24.3% | 25.4% | (110bps) | ||
| SG&A as % of revenue | 23.1% | 23.0% | 10bps | ||
| Restructuring charges | $91 | $0 | N/A | ||
| Operating income | $33 | $260 | (87%) | ||
| Operating income as a % of revenue | 0.3% | 2.4% | (210bps) | ||
| Diluted EPS from continuing operations | $0.04 | $0.39 | (90%) | ||
| Adjusted (non-GAAP) Results2 |
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| Operating income | $124 | $260 | (52%) | ||
| Operating income as a % of revenue | 1.2% | 2.4% | (120bps) | ||
| Diluted EPS from continuing operations | $0.20 | $0.39 | (49%) | ||
| Key Metrics3 |
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| Total U.S. big box retail square feet | 41.0 | 42.6 | (4%) | ||
| Revenue per square foot (Domestic segment) | $857 | $846 | 1% | ||
| Adjusted operating income per square foot (Domestic segment) | $41 | $45 | (9%) | ||
| Adjusted return on invested capital4 |
11.1% | 10.7% | 40bps | ||
Fiscal Second Quarter 2013 Highlights
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Domestic comp store sales decline of 1.6 percent improved compared to fiscal first quarter decline of 3.7 percent
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Domestic estimated market share maintained year-over-year
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U.S. big box square footage reduced by 4 percent year-over-year; Domestic revenue per square foot up 1 percent year-over-year
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Similar to the first quarter of fiscal 2013, International segment year-over-year operating income decline driven primarily by lower revenue in China, Canada and increased competitive conditions in Europe
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Domestic segment total Services category revenue increased approximately 6 percent
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Momentum grows in Domestic services with key partnerships announced recently: AARP, Verizon and Target
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Domestic segment online revenue growth of 14 percent
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Domestic segment connections growth of 11 percent
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Domestic segment mobile phones comparable store sales growth of 35 percent
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Domestic segment comparable store sales growth in tablets, mobile phones, appliances and eReaders more than offset by declines in gaming, digital imaging, televisions and notebooks
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Adjusted (non-GAAP) Domestic segment year-over-year operating income decline driven primarily by lower gross margins in computing, mobile phones and televisions
Best Buy today announced GAAP net earnings from continuing
operations were $12 million, or $0.04 per diluted share, for the three
months ended August 4, 2012 compared to net earnings from continuing
operations of $150 million, or $0.39 per diluted share for the
prior-year period.
Revenue
| Three Months ended Aug. 4, 2012 | Prior-Year Period | ||||||
| ($millions) |
Revenue | Change YOY | Comp. Store Sales | Comp. Store Sales | |||
| Domestic | $7,803 | (2.2%) | (1.6%) | (4.1%) | |||
| International | 2,744 | (4.7%) | (8.2%) | (2.8%) | |||
| Total | $10,547 | (2.8%) | (3.2%) | (3.8%) | |||
The Domestic segment comparable store sales decline of
1.6 percent was driven by declines in gaming within the Entertainment
revenue category, digital imaging and televisions within the Consumer
Electronics revenue category and notebooks within the Computing and
Mobile Phones revenue category. These declines were partially offset by
comparable store sales growth in tablets and mobile phones within the
Computing & Mobile Phones revenue category, the Appliances revenue
category, and eReaders within the Consumer Electronics revenue category.
The Domestic segment online channel revenue grew 14 percent compared to
the prior-year period.
The International segment comparable store sales
decline of 8.2 percent was driven by the lower growth in consumer
spending in China and the continued impact from the expiration of
government sponsored programs, which negatively impacted sales in Five
Star. Market softness in notebooks, digital imaging and home theater in
Canada also contributed to the International comparable store sales
decline.
Gross Profit
| Three Months ended Aug. 4, 2012 | |||||
| ($millions) |
Gross Profit | Change YOY | % of Revenue | ||
| Domestic | $1,896 | (6%) | 24.3% | ||
| International | 668 | (9%) | 24.3% | ||
| Total | $2,564 | (7%) | 24.3% | ||
Domestic segment gross profit decreased 6 percent,
reflecting a rate decline of 110 basis points compared to the prior-year
period. The Domestic segment rate decline was primarily due to three
factors. In mobile phones, connection growth and a mix into higher price
point smart phones resulted in strong comp sales and gross profit
dollar growth, although at a lower overall rate. Second, industry
softness in computing resulted in increased promotional activity in the
quarter to stimulate consumer demand ahead of the second half of fiscal
2013, which will include the Windows 8 launch. Finally, there was less
favorable product mix within the television category.
International segment gross profit declined 9 percent,
reflecting a rate decline of 130 basis points compared to the prior-year
period. This rate decline was driven by Best Buy Europe and due
primarily to increased mix of lower margin wholesale sales and
promotional activity within a price competitive environment for mobile
phones.
Operating Income
| Three Months ended Aug. 4, 2012 | |||||
| ($millions) |
Operating Income | Change YOY | % of Revenue | ||
| Domestic | $83 | (65%) | 1.1% | ||
| International | (50) | n/a | (1.8%) | ||
| Total | $33 | (87%) | 0.3% | ||
What should they do to survive the onslaught of online retail (and the show-rooming effect) and of discount retailers?
I think the following measures would make sense:
- Continue to aggressively expand the services business by extending tie-ups to a wider range of partners (much like their VZ, TGT and AARP alliances). Become the preferred service partner for as many telecom and cable companies, and computer/ TV manufacturers as possible so that customers look to Geek Squad irrespective of the brand of device or service being consumed.
- Improve online buying experience. Bestbuy.com does not have a good recommendation engine ("People who bought this product also bought Y", "People who viewed this product bought X"), unlike Amazon. Also BestBuy.com should clearly state its free shipping policy and clearly highlight the value of the store pick-up option.
- Continue to close down unprofitable stores
- Focus more on small kiosks at airports (mp3 players, DVDs, headsets) and on smaller store formats -- these locations have lower SG&A
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