By Tess Stynes
Best Buy Co.'s holiday sales declined, hurt by heavy promotions
during the season and weakness at its domestic retail stores.
For the nine-week period ended Jan. 4, same-store sales--which
includes stores open at least 14 months and online sales--decreased
0.8%, below analysts expectations. U.S. same-stores sales fell
0.9%. According to Retail Metrics, analysts expected Best Buy to
report same-store sales grew 0.7% for the holiday period.
Best Buy boosted its promotions to compete with other retailers
during the holiday season, and warned in November that its fiscal
fourth-quarter margins could take a hit as a result. The company
was among a long list of retailers that opened most of its doors on
Thanksgiving Day in an effort to attract more shoppers. Best Buy
also extended its hours in the days leading up to Christmas.
President and Chief Executive Hubert Joly said in a statement
that the highly promotional holiday season and Best Buy's pricing
efforts came at a higher than expected cost, with the company now
expecting that its operating income will decline in the fourth
quarter.
Janney Capital Markets analyst David Strasser said, "It just
seems that the promotions did not drive incremental sales, that
opening on Thanksgiving just added costs, and did not provide any
incremental sales."
Mr. Joly also stated that holiday revenue was hurt by factors
including supply constraints for key products, significant traffic
declines during the middle of the holiday season and a
"disappointing" mobile-phone market.
Mr. Joly said the holiday performance "reinforces our resolve
and our sense of urgency around our transformation," with its key
priorities including further reductions in its cost structure.
At its U.S. business, consumer electronic same-store sales fell
6%, while computing and mobile phone same-store sales improved
3.2%. In the entertainment segment, same-store sales dropped
6.6%.
Electronics and appliances retailer HHGregg Inc. last week gave
a disappointing fiscal third-quarter outlook. The company estimated
that same-store sales fell 11%, including a 20% drop in consumer
electronics. HHGregg President and Chief Executive Dennis May noted
the company didn't fully participate in the heavily promotional
environment over the holiday season.
GameStop Corp.'s stock lost a fifth of its value Tuesday after
reporting a sharp drop in holiday sales and cutting its
fourth-quarter quarter earnings estimate. While it benefited from
the launch of Microsoft Corp.'s Xbox One and Sony Corp.'s
PlayStation 4, sales of games for older consoles were weaker than
expected.
Write to Tess Stynes at tess.stynes@wsj.com
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