Tough times continue at Best Buy, Q1 earnings, comps fall

MINNEAPOLIS — Best Buy reported GAAP net earnings from continuing operations of $161 million, or 47 cents per diluted share, for the first quarter ended May 5, compared with net earnings from continuing operations of $255 million, or 64 cents per diluted share for the prior-year period. Excluding previously announced restructuring charges, adjusted (non-GAAP) net earnings from continuing operations for the first quarter was $246 million, or 72 cents per diluted share, compared with adjusted net earnings from continuing operations of $258 million, or 65 centsper diluted share, for the prior-year period.

"Best Buy is in a turnaround, and the strategic priorities we laid out at the beginning of the year are just the first phase of the changes to come," said Mike Mikan, CEO (interim) of Best Buy. "We know we have to better adapt to the new realities of the marketplace, and we are creating a long-term plan designed to make Best Buy more relevant with customers and position the company for sustained, profitable returns in the years ahead. First quarter results were in-line with our expectations, and we are reaffirming our previously provided annual guidance for fiscal 2013."

Total company revenue was $11.6 billion during the fiscal first quarter, an increase of 2.1% compared with the prior-year period, and included a comparable store sales decline of 5.3%. The comparale-store sales decline was offset by sales growth in tablets, mobile phones and e-readers. These increases were more than offset by comparable-store sales declines primarily in notebooks within the computing and mobile phones revenue category, gaming within the entertainment revenue category, and digital imaging and televisions within the consumer electronics revenue category. The domestic segment online channel revenue grew 20% compared with the prior-year period.

International segment comparable-store sales declined 10.5%. As the company previously discussed, first quarter sales were expected to be lower driven by declines in the Five Star business stemming from the expiration of government sponsored programs and a slowdown in the Chinese economy. The impact of the change in these programs was similarly felt by other retailers in China. Additionally, softness in notebooks, home theater and gaming resulted in comparable-store declines in Canada, and the difficult macro environment and changes in network subsidies for the pre-pay U.K. phone market led to lower mobile phone sales in the company's Europe business.

Best Buy is maintaining its fiscal 2013 outlook of adjusted (non-GAAP) diluted EPS in the range of $3.50 to $3.80, including the impact of expected share repurchases and excluding fiscal 2013 restructuring costs.