Smartphone demand boosts Best Buy results

BEST BUY, the largest US consumer electronics retailer, reported first-quarter profit that exceeded analysts’ estimates, helped by demand for smartphones.

Net income fell 25 per cent to $158 million, or 46 cent a share, from $212 million, or 53 cent, a year earlier, according to the Richfield, Minnesota-based company.

Profit excluding restructuring costs totalled 72 cent a share. Analysts projected 59 cent, the average of 22 estimates compiled by Bloomberg.

Best Buy lured customers with discounts on smartphones, part of former chief executive officer Brian Dunn's efforts to compete with Amazon.com.

Lower demand for televisions and notebook computers reduced comparable-store sales in the quarter by 5.3 per cent as the company seeks Dunn’s replacement following his resignation last month.

“It would be a stretch to say Best Buy is on trajectory to beat and raise guidance,” according to Brian Sozzi, an independent analyst in New York.

He rates the shares as underperform, equivalent to a sell rating, and said declining comparable-store sales were “worrying”. Revenue in the quarter, which included an extra week, increased 2.1 per cent to $11.61 billion, declining 4.3 per cent, Best Buy said. The company reaffirmed its full-year profit forecast of $3.50 to $3.80 a share.

Best Buy rose 0.2 per cent to $18.20 in the early morning in New York. The shares had declined 22 per cent this year before today. Dunn (52) resigned last month amid a board probe that found he had an inappropriate relationship with a female employee.

The company said yesterday it selected executive-search firm Spencer Stuart to conduct its hunt for a replacement after naming director Mike Mikan as interim chief. The firm previously said the search may take as long as nine months.

Mr Mikan said on a conference call yesterday the company planned to unveil its turnaround plan this summer, adding that the retailer was “not prepared” for the rise of online competition in recent years. Last week the company said founder Richard Schulze would step down as chairman. – (Bloomberg)