January 16, 2014

Best Buy Misses Big

Filed under: Business Moves,Economy — Tom @ 8:57 am

Are we really sure about that 3.8% overall Christmas shopping season increase the National Retail Federation is touting?

Business Insider (bolds are in original):

Best Buy shares were down as much as 33% to $25.32 in pre-market trading, after the retailer announced horrible holiday results.

Best Buy now expects its Q4 non-GAAP operating income to be 175 to 185 basis points lower than the 5.7% non-GAAP operating income a year ago.

Best Buy said U.S. comparable store sales were down 0.9% in the nine weeks ending January 4, 2014. But were up 0.1% internationally.

The store did however see a 23.5% jump in comparable online sales for the same period, compared with 10% a year ago.

“When we entered the holiday season, we said that price competitiveness was table stakes and an intensely promotional holiday season is what unfolded,” said Hubert Joly, Best Buy president and CEO said in a press release.

“…However, our holiday revenues were negatively impacted by a number of factors, including: (1) the aggressive promotional activity in the retail industry during the holiday period, which we believe did not result in higher industry demand and had a deflationary impact on our revenue; (2) supply constraints for key products; (3) significant store traffic declines between “Power Week” and Christmas; and (4) a disappointing mobile phone market.”

“Best Buy is out with its holiday sales update and to put it mildly, it’s on the shocking side,” said Brian Sozzi of Belus Capital Advisors.

… Multiple retailers have said competitive pricing during the holiday season weighed on profits.

Best Buy’s full press release is here. OUCH — Nine-week comparable store consumer electroncis and entertainment sales were down by 6 percent and 6.6. percent, respectively, compared to the same nine weeks last year.

These results don’t surprise me as much as they are apparently surprising others. My impression is that store traffic throughout the economy cratered between “Power Week” and Christmas. Yes, weather was a factor during the first weekend after “Power Week,” but the pickup during the week after that was not that impressive.

This certainly doesn’t bode well for anyone in retail who was hoping to turn their seasonal job into something longer-term this year.

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