--Quarterly per-share earnings falls far short of analyst expectations

--Company suspends guidance on lower earnings expectations and arrival of CEO

--No further details of turnaround until new CEO gets up to speed

(Adds executive comments from conference call, further details.)

 
   By Joan E. Solsman

Best Buy Co. (BBY) suspended its earnings guidance following a 91% quarterly profit decline Tuesday, providing investors with scant details about how it and a newly appointed chief executive will revive the struggling consumer-electronics chain.

The big-box retailer continued to lose sales in key categories like televisions and notebook computers in the latest period, and it battled weaker margins than it anticipated because of promotions and unfavorable changes in its sales mix.

But executives kept mum on further turnaround plans, saying the company needed to give incoming Chief Executive Hubert Joly time to digest Best Buy's business and flexibility to make his own decisions.

The worse-than-expected results sent Best Buy shares down to nine-year lows at the open, but the stock has since recovered to $17.97, a 1% decline, in recent trade. The slide follows a 10% selloff Monday after the naming of Joly as CEO and the continued blocking of a proposed buyout by its founder and biggest shareholder.

The choice of Joly baffled some company watchers. A hospitality executive with experience stabilizing troubled companies, Joly nevertheless has a resume light on retailing and fending off the kind online pressures that have increasingly made Best Buy's big-box model seem obsolete.

Mike Mikan, a Best Buy director who has served as interim chief since April, said on a conference call Tuesday that Best Buy has done "a good deal of advance work" on initiatives like expanding digital services, reducing costs and cutting square footage in recent months.

The company will share its findings with Joly when he comes on board next month, but "it would not be fair to him to discuss the details today," Mikan said.

However, founder and largest shareholder Richard Schulze has argued the company has no time to waste protecting shareholder value as he presses for a privatization of Best Buy.

Talks between Mr. Schulze and the company's board stalled this weekend over the terms of allowing Mr. Schulze access to the company's books before stepping up his pursuit, leaving their feud unsettled. Mr. Mikan said Tuesday that Best Buy's proposal still stands and "it's up to Dick to respond from there."

Granting Joly breathing room was a key factor in Best Buy suspending both its earnings guidance and share buybacks for the year, executives said. Best Buy also blamed the suspended view on lowered expectations for industrywide sales and uncertainty surrounding several key product launches.

The company doesn't expect the second-quarter trends to extend into the second half in the same way, executives said, noting that many of the headwinds weren't unique to Best Buy. Competitors like HHGregg Inc. (HGG) and RadioShack Corp. (RSH) also have reported weak product trends recently.

They also touted that Best Buy preserved market share and that sales at stores, call centers and websites operating for at least 14 months improved sequentially.

Yet same-store sales still fell 3.2% in the latest period. It is the eighth time in the last nine quarters Best Buy's comparable sales have dropped.

In the U.S., same-store sales fell 1.6%. Its key consumer electronics sales kept dwindling, with the latest 9.6% domestic drop the biggest in more than a year. Its biggest category, computing and mobile phones, continued steady same-store sales growth thanks to strength in tablet and mobile phone sales, but the low-margin profile of smartphones worked against the company's profitability.

Best Buy was the latest retailer to report international weakness with an 8.2% drop in same-store sales abroad. It attributed the decline mostly to China, which is marked by lower consumer spending, weakness in housing and the absence of government-sponsored rebate programs for appliances and other products.

Compounding the sales weakness, gross margin narrowed more than the company anticipated to 24.3% from 25.4%. Best Buy ramped up promotions on notebooks as sales volume dropped, presumably ahead of a new Windows system launching later this year. That helped revenue and inventory position but hurt margin. A greater mix of small and mid-size televisions and high-price-point smartphones further weighed on profitability.

Best Buy has long struggled to keep up with changes in consumer electronics as the weight of its big-box format inhibits it from fending off the competitive pressure of online retailers like Amazon.com Inc. (AMZN). The company has become a particularly acute example of a phenomenon known as "showrooming," where bargain-hunting shoppers browse stores then buy the products cheaper online.

For the quarter ended Aug. 4, Best Buy reported a profit of $12 million, or four cents a share, down from $128 million, or 34 cents a share, a year earlier. The latest results include a $91 million restructuring charge, primarily related to store-closure costs. Stripping out one-time items, the company's per-share profit was 20 cents versus 39 cents a year ago. Revenue fell 2.8% to $10.55 billion.

Analysts polled by Thomson Reuters expected earnings of 31 cents a share on $10.63 billion in revenue.

--Saabira Chaudhuri contributed to this article.

Write to Joan E. Solsman at joan.solsman@dowjones.com

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