Business Matters: Disappointing Best Buy Quarter Part of Technology Retail Slide
Business Matters: Disappointing Best Buy Quarter Part of Technology Retail Slide

NEW YORK - Best Buy Co Inc (BBY.N) beat quarterly profit and sales estimates as strong demand for mobile phones, calling plans and tablets offset weakness in its TV business, and its shares rose 6 percent.

The company, seen as a bellwether in consumer electronics, also backed its profit outlook for the year.

The news comes just months after the biggest U.S. consumer electronics chain decided to focus more on its mobile phone and online businesses and shrink its big-box format as investors raised concerns about the huge overhead costs and oversized stores at a time when many shoppers go online to buy gadgets.

In the United States, demand was strong for mobile phones, tablets, eReaders, appliances and services, while sales of televisions continued to be weak. Outside its home turf, the retailer saw strong demand in China even as same-store sales fell in Europe and Canada.

The company said its first-quarter net profit was $136 million, or 35 cents a share, compared with $155 million, or 36 cents a share, a year earlier. Analysts on average were expecting a profit of 33 cents a share, according to Thomson Reuters I/B/E/S.

Sales rose 1.4 percent to $10.94 billion, beating the analysts average estimate of $10.71 billion. Same-store sales in the quarter fell 1.7 percent, while analysts were looking for as much as a 4 percent decline.
Best Buy faces stiff competition from online retailer Amazon.com Inc (AMZN.O) and discounters Wal-Mart Stores Inc (WMT.N) and Target Corp (TGT.N).

The retailer recently announced plans to boost its Web presence, shrink some larger stores and open more of its smaller U.S. stores.

Earlier on Tuesday, Carphone Warehouse (CPW.L), which owns 50 percent of a joint venture with Best Buy in Europe, said it has delayed a decision on the next steps for its loss-making UK consumer electronics megastores business until the autumn, mulling the wisdom of expanding as consumer demand slides.

(Reporting by Dhanya Skariachan; Additional reporting by James Davey in London, editing by Gerald E. McCormick, Dave Zimmerman)

NEW YORK (Reuters) - Best Buy Co Inc (BBY.N) is poised to report its fourth straight quarter of same-store sales declines on weakness in its television business on Tuesday.

The biggest U.S. consumer electronics chain also faces tough comparisons in the seasonally weak first quarter. Last year, a federal stimulus boosted sales of energy-efficient appliances.

RBC Capital Markets analyst Scot Ciccarelli sees a 5 percent drop in same-store sales, while Wedbush analyst Michael Pachter sees a 4.2 percent decline.

Analysts expect total sales to fall less than 1 percent to $10.71 billion. They see earnings of 33 cents a share, before items, versus 36 cents in the year-ago period, according to Thomson Reuters I/B/E/S.

Best Buy's results will show if it is losing bargain-hungry shoppers to online retailer Amazon.com Inc (AMZN.O) or other brick-and-mortar chains such as Target Corp (TGT.N), Wal-Mart Stores Inc (WMT.N) and Costco (COST.O) that compete on price.

"Yes, consumer electronics retail faces competitive pressure from discount and online, but we think these forces have been exacerbated by a multi-category lull in product cycles," Stifel Nicolaus analyst David Schick wrote.

Some analysts expect that to change when a slew of tablet computers hit store shelves this back-to-school season and shoppers warm up to the idea of replacing their outdated TVs later this year.

"Our thesis is 2011 could see a developing HDTV mini-cycle as consumers entertain replacing 2003/2004-era Plasma sets," Schick said. "We think the consumer electronics industry was off target in attempting 3DTV and IPTV in 2010."

While demand for televisions is still uncertain, strong demand for smartphones and calling plans should help Best Buy's margins in the first quarter, analysts said.

Best Buy shares have fallen 6.4 percent in the past month, while the larger S&P 500 Index fell just 0.07 percent, in a sign that much of the weakness has also been baked into the retailer's shares.

Wall Street analysts on average expect same-store sales to drop 4 percent and operating margins to fall 40 basis points, Deutsche Bank analyst Mike Baker pointed out.

"Leading indicators, like industry sales and competitor comments, point to a soft quarter, but no worse than these expectations," Baker added.

(Reporting by Dhanya Skariachan, editing by Bernard Orr)