NEW YORK: Best Buy Co has showed the first concrete signs of a turnaround in its US stores, with flat same-store sales during the key holiday season, helped by sales of tablets and mobile phones and improvement in its online business.
Best Buy, which is restructuring and faces a looming buyout proposal by founder and former chairman Richard Schulze, saw total revenue slip 0.4 per cent to $12.8 billion in the nine weeks ended Jan.5. Sales at stores open at least 14 months declined 1.4 per cent, versus a 0.4 per cent decline in the 2011 holiday period.
The holiday was the first under new CEO Hubert Joly and the company has taken several steps to try to stabilize sales, including trying to improve its online business, matching competitors’ online prices for some items during the 2012 holiday shopping season and giving additional training to workers at its stores. US online sales rose 10 per cent to $1.1 billion.
Same-store sales were flat in the United States and fell 6.4 per cent internationally on declines in Canada and China.
The flat US same-store sales performance in the interim report was much better than decline of 2.5 per cent expected by Janney analyst David Strasser, but he said that the international decline was steeper than the 4.5 per cent decline he had anticipated.
Best Buy is expected to report full fourth-quarter results on Feb.28.
“The company likely gained market share,” Strasser said in a note to clients. “These results should put a long awaited floor on the stock and give potential buyers incremental confidence in the structural strengths.”
Best Buy appeared to avoid the missteps that plagued recent holiday seasons. In 2010, it made a bad bet on pricier 3-D televisions that customers did not embrace and in 2011 it struggled to keep up with increased online demand.
Still, some were concerned about Best Buy reducing its free cash flow guidance for the second time in less than two months.
“We believe Best Buy’s revised free cash flow forecast will make it even more difficult for founder and former Chairman Richard Schulze to line up the necessary financing to take the company private,” said BB&T analyst Anthony Chukumba.
The company now expects free cash flow of about $500 million for the year ending on Feb.2. I n November, it had lowered its forecast to a range of $850 million to $1.05 billion, down from a range of $1.25 billion to $1.5 billion provided in August.
While comparable-store sales, gross margin, earnings and inventory levels were in line with the company’s expectations, Best Buy now expects fiscal 2013 accounts payable as a per centage of inventories to be lower than those of the previous year. It previously said they would be consistent with those of the prior year.
Best Buy said it had received inventory earlier than expected and therefore had to make payments earlier. Thanksgiving fell on Nov.22 in 2012, two days earlier than in 2011.
It also saw a shift in sales mix to products that sell more quickly and carry shorter payment terms, such as mobile phones, tablets and e-readers. The company said that its overall vendor payment terms were consistent with the prior year.