Holiday crowd boosts Best Buy
Customers snapping up electronics and gift cards for the holidays boosted Best Buy’s third-quarter profit, but the nation’s largest electronics retailer said Tuesday that shoppers are focused on prices, particularly of TVs and computers.
Best Buy predicted consumers will stay that way in the fourth quarter, squeezing its profit margin. That forecast sent the retailer’s shares down nearly 8 percent from their highest level in a year.
Still, Best Buy Inc. raised its annual profit and revenue forecasts and said both traffic and shoppers’ average spending rose from a year ago.
Sales at Best Buy stores that have been open at least one year — a key measure — rose more than 10 percent over Thanksgiving weekend, CEO Brian Dunn said in a call with analysts. Half the gain came from higher traffic, and half from customers spending more.
Best Buy’s website sales rose 20 percent in the quarter, which ended on Nov. 28, the Saturday after Thanksgiving, from a year earlier. Jim Muehlbauer, Best Buy’s CFO and executive vice president of finance, looked to the rest of the holiday shopping season with cautious optimism cash till payday. "The trends we experienced in the third quarter continue to provide encouragement about what lies ahead in the balance of the fiscal year," he said.
Sales of gift cards rose 40 percent in November, after a "dramatic" drop last year as consumers cut their spending as the financial crisis ballooned, Dunn said. Other strong sellers were notebook computers, TVs, mobile phones and appliances, while sales of higher-margin games, movies and music were weaker.
Net income rose to $227 million, or 53 cents per share, from $52 million, or 13 cents, last year when it wrote down the value of its U.K. retailer Carphone Warehouse. Revenue rose 5 percent to $12.02 billion. The Minneapolis company now expects yearly revenue of $49 billion to $49.5 billion, up from previous guidance of $48 billion to $49 billion.
Filed under: online by Finance Boss