360° Coverage : Best Buy's Sales Suffer Due To Weak Holiday Season And Bad...

2 Updates

Best Buy's Sales Suffer Due To Weak Holiday Season And Bad Weather

Mar 4 2014, 1:38pm CST | by

Electronics retailing giant Best Buy posted revenues of $14.47 billion in Q4 fiscal 2014, a 3% decline as compared to the prior year comparable quarter. (Fiscal years end with January.) Comparable...

Filed under: news

 
 
 

32 weeks ago

Best Buy's Sales Suffer Due To Weak Holiday Season And Bad Weather

Mar 4 2014, 1:38pm CST | by

Electronics retailing giant Best Buy posted revenues of $14.47 billion in Q4 fiscal 2014, a 3% decline as compared to the prior year comparable quarter. (Fiscal years end with January.) Comparable Store Sales for the quarter declined 1.2%. Both domestic and international revenues declined. Additionally, the company saw non-GAAP diluted EPS of $1.24 in Q4, which was better than expected, as it continued to record cost savings through the Renew Blue program.

Best Buy’s gross margin fell by 210 basis points annually to 20.2%. Domestic gross margin was hurt by factors such as incremental investment in structural and promotional pricing, negative impact of the new credit card agreement, increased product warranty-related costs associated with higher claims frequency in the mobile phone category and lower attachment rates on mobile service plans. The international gross profit dipped due to increased promotional activity and a shift to lower margin products in the Canadian business. However, SG&A expenses as a % of revenue decreased to 16.1% as compared to 16.9% in Q3 fiscal 2013. This was attributed to cost savings through the Renew Blue program, better expense management and reduction in labor-associated costs at stores. This led to an annual expansion in operating margins to 3.2% in Q4 fiscal 2014, as compared to a loss of 1.2% in Q4 fiscal 2013.

See our full analysis for Best Buy

Snapshot Of Q4 2014 Results

Best Buy’s sales suffered in the quarter due to declining retail traffic, intense promotion, fewer holiday shopping days, and severe weather. In the consumer electronics category, sales were weaker than expected and the phenomenon of showrooming continued to gain traction among customers who are shifting to the online channel.
/>

Domestic revenue declined by 1.8% annually during the quarter, as a result of a comparable store sales decline of 1.2% (as noted). Excluding the negative impact due to certain short-term measures, the comparable stores sales decreased by 0.6% annually. The growth in computing, appliances and gaming categories was more than offset by decline in other categories such as digital imaging, movies and home theater.

The domestic comparable online sales rose by 25.8%, as compared to 15.1% growth in the previous quarter, owing to factors including higher traffic, growth in average order value, increased inventory at the online channel and higher conversion rate on both the core and mobile sites. We believe this metric will continue to post strong growth in the future, as Best Buy is taking several measures to enhance its e-commerce channel.

The international revenue fell by 9.6% on account of factors such as 1.7% decrease in comparable store sales, store closures in China and Canada, and adverse currency effects. Declining industry trends in Canada and Mexico contributed to the significant drop in comparable stores sales in these markets.
/>
Progress Was Seen On The Renew Blue Program

At the beginning fiscal 2014, Best Buy initiated six key initiatives under the “Renew Blue” program to turn around the company. These include: 1) accelerating online growth; 2) enhancing the multi-channel customer experience; 3) increasing revenue and gross profit per square foot to enhance store space optimization and merchandising; 4) driving down cost of goods sold through increased supply chain efficiencies; 5) continuing to gradually optimize the U.S. real estate portfolio; and, 6) further reducing SG&A expense as a percent of sales. The company made progress against each of these strategic initiatives during the quarter, and will continue to invest in them going forward.

During the quarter, Best Buy saw consumers shifting to the online channel in large numbers. Every metric that the company uses to track the growth of this channel showed improvement. As a result, online sales constituted 12.7% of the total domestic sales, up from 10% last year. The Net Promoter Score which measures satisfaction levels for both customers that buy and don’t buy products, rose by 300 basis points annually. However, this progress also came at a price. Best Buy said that since online sales have a higher mix of lower margin hardware products as compared to high-margin services and accessories, its profitability was affected.
/>

Optimization of floor space was undertaken by devoting more space to profitable product categories such as mobile phones and tablets. In addition, the company realized $200 million in cost savings for the whole year through reduction in its SG&A expense. This resulted in total annualized costs savings of $765 million, which far exceeded the company’s target of $725 million in savings.

Our price estimate of $27.84 for Best Buy is at a 6% premium to the current market price. We will update our valuation shortly in view of the Q4 2014 earnings release.

See More at Trefis | View Interactive Bernstein Research (Powered by Trefis)

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

Source: Forbes Business

 
Update
2

7 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) an ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

7 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the d ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Budapest: the 'startup' capital of Eastern Europe
Budapest, Oct 21 (IANS/EFE) Barack Obama, the Dalai Lama and NASA all have one thing in common - the fact that they distributed live videos on Ustream, the app of the Hungarian startup that represents Budapest's potential to become a technology hotspot of Europe's eastern region.
 
 
Developing countries participate in half of world trade
Geneva, Oct 21 (IANS/EFE) The participation of developing countries in world trade accounts for nearly half of global trade, according to a report by the World Trade Organisation (WTO).
 
 
India showcases IPL as driver of economic development
United Nations, Oct 21 (IANS) The success of the Indian Premier League (IPL) in cricket embodies the emergence of sports as a global industry that promotes economic development and job creation in developing countries, India told the UN General Assembly (UNGA) Monday.
 
 
Cuba dispatches two new medical brigades to Africa
Havana, Oct 21 (IANS/EFE) Cuban President Raul Castro has announced that two health brigades from the island will be dispatched to Liberia and Guinea Conakry this week to collaborate in the fight against the Ebola virus disease epidemic.
 
 
 

Latest from the Network

1,074 new dengue cases in Chinese province
Beijing, Oct 18 (IANS) China's Guangdong province has reported 1,047 new cases of dengue fever, health authorities said Saturday. Six people have already died in Guangdong -- five in Guangzhou and one in adjacent...
Read more on Business Balla
 
Blake Lively 'always' wanted to be mum
Blake Lively has ''always'' wanted to be a mother. The 27-year-old actress is expecting her first child with husband Ryan Reynolds and she admits she's been dreaming of this moment since she was a youngster. Speaking...
Read more on Celebrity Balla
 
Kris Jenner 'torn apart' by Bruce's new relationship
Kris Jenner feels ''torn apart and angry'' that Bruce Jenner is dating her former assistant. The 58-year-old matriarch split from the 64-year-old Olympic gold medalist last October following 22-years of marriage but is...
Read more on Celebrity Balla
 
Cheryl Fernandez-Versini won't move to France
Cheryl Fernandez-Versini doesn't want to move to her husband's home country of France. The 'X Factor' judge, 31, who comes from Newcastle, is adamant she won't be relocating any time soon to suit her new spouse Jean-...
Read more on Celebrity Balla
 
Lance Bass sets wedding date
Lance Bass has set a date for his wedding. The former *NSYNC singer and his partner Michael Turchin, who have been dating for two-and-a-half years, are to tie the knot on December 20, 2014, a representative for the...
Read more on Celebrity Balla
 
Nepal avalanche toll reaches 39
Kathmandu, Oct 18 (IANS) At least 39 climbers died while hiking on a key Nepali route after it was hit by a major snowstorm and avalanches earlier this week, BBC reported Saturday citing officials. Over 350 stranded...
Read more on Politics Balla
 
Jake Gyllenhaal says society is complicit in 'nightcrawling'
Jake Gyllenhaal says almost everybody in society ought to relate to his new movie 'Nightcrawlers'. The eagerly-awaited film concerns those people who monitor police scanners and then race to crime scenes to film eye-...
Read more on Movie Balla
 
India eves look for first win in AFC U-16 qualifiers
Dhaka, Oct 18 (IANS) India will hope to register their first win of the 2015 Asian Football Confederation (AFC) Under-16 Women's Championship qualifiers when they take on hosts Bangladesh in a crucial encounter at the...
Read more on Sport Balla
 
Moyes mulling return to management
London, Oct 18 (IANS) Former Manchester United manager David Moyes said that he is ready to revive his managerial career six months after being sacked by the 'Red Devils'. "I am ready to return. I have enjoyed the...
Read more on Sport Balla
 
Ebola fears loom over Ghana hosting AFCON
Accra (Ghana), Oct 18 (IANS) The Ghana Medical Association (GMA) cautioned the government Saturday against hosting the 2015 African Cup of Nations (AFCON), despite a request by the Confederation of African Football (...
Read more on Sport Balla