Best Buy Partly Blames Console Hardware For Low Profits

Officials from U.S. retailer Best Buy have announced the company’s first quarter financial results, with weaker than expected profits being partly blamed on lower margin products such as notebooks and game consoles. The company reported profits of $192 million for the three months ended June 2nd, down from $234 million at the same time the previous year. Sales, though, were up to $7.93 billion, from $6.96 billion the previous year – beating analyst estimates. Consumer electronics represented 43 percent of first quarter revenues and saw a 1.4 percent comparable store gain, with increases in flat panel televisions and home theater services offset by a fall in CRT and projection television sales and MP3 players. The company’s entertainment software product group represented 17 percent of first quarter sales and saw a 1.3 percent rise in comparable store sales. An unspecified double digit increase in sales of video games hardware and software was partially offset by declines in sales of CDs and DVDs. For the full year, the company predicts earnings per diluted share of $2.95 to $3.15, an average increase of approximately 9 percent on the previous year. A “nominal” increase is expected in the company's operating income rate, with an annual comparable store sales gain of 3 to 5 percent. “Our first-quarter results fell short of our expectations. Strong revenue results from lower-margin products significantly cut into our gross profit rate,” said vice chairman and CEO Brad Anderson. “Yet our customers continued to increase our market share. Our share gains, combined with other indicators we see, show that our core business is healthy. To us, the totality of our results suggests we are on the right track with our strategy, which is aimed at re-defining the customer experience.” Darren Jackson, executive vice president of finance and CFO said, “Early evidence suggests that consumer spending will be more difficult to predict this year — but it appears to be accelerating in lower-margin categories. We are confident that flat panel TVs, gaming and notebook computers will remain very appealing to our customers.”