Best Buy Q1 Net Drops; Cuts Comparable Sales Drop; Stock Gains

(RTTNews) - Electronics retailer Best Buy Co., Inc. (BBY) Thursday reported a lower net profit for the first quarter, but comparable sales improved from the prior year, benefiting from the demand for mobile phones, large-screen televisions and major appliances. The stock surged nearly 10 percent in the pre-market activity.

Net earnings attributable to shareholders decreased to $129 million or $0.36 per share from $461 million or $1.31 per share in the prior-year quarter.

The Richfield, Minnesota-based retailer, known as the "big blue box" because of the prominent design on Best Buy stores, reported decline in its net earnings from continuing operations to $0.10 per share from $1.33 per share in the comparable quarter last year.

Adjusted net earnings from continuing operations were $0.37 per share, up from $0.35 per share in the year-ago quarter.

On average, 25 analysts polled by Thomson Reuters expected the company to report earnings of $0.29 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue declined to $8.56 billion from $8.64 billion in the same quarter last year. Analysts expected revenues of $8.46 billion.

Domestic revenue edged up 1.4 percent to $7.9 billion, primarily driven by an estimated 130-basis point benefit associated with installment billing and a $40 million, or 50-basis point, improvement in the performance of the credit card portfolio.

International revenue declined 22.1 percent to $668 million due to a negative foreign currency impact of 1,000 basis points, the loss of revenue from the Canadian brand consolidation and ongoing softness in the Canadian consumer electronics industry.

During the quarter, the company consolidated the Future Shop and Best Buy brands in Canada under the Best Buy brand. This consolidation is expected to have a material impact on all Canadian retail stores and the website on a year-over-year basis.

Excluding the estimated benefit of installment billing, Enterprise Comparable Sales slipped 0.7 percent, smaller than 1.8 percent drop last year.

According to the retailer, the results reflected a stronger-than-expected performance in the Domestic business, where the company took advantage of strong product cycles in large screen televisions and iconic mobile phones and continued growth in the major appliance category.

Looking ahead, Hubert Joly, Best Buy president and CEO, said the retailer's enterprise outlook for the second quarter includes a flat to negative low-single digit revenue growth rate and a year-over-year non-GAAP operating income rate decline in the range of negative 30 to 50 basis points, in-line with its previous outlook.

BBY, which closed down 3.4 percent on Wednesday, climbed 9.6 percent in pre-market activity.