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McClatchy-Tribune  08/26/2014 2:19 PM ET
Best Buy hits on profit, falls shy on revenue [Star Tribune (Minneapolis) :: ]

Aug. 26--Best Buy Co.'s second-quarter profit was higher than expected, but its sales fell short and executives remained cautious for the second half of the retailer's fiscal year.

They cited industrywide drops in sales of consumer electronics products and uncertainty about the timing of product launches from cellphone manufacturers.

"Absent any change in these declining industry trends and with limited visibility to new product launch quantities, we continue to expect comparable sales to decline in the low-single digits in both the third and fourth quarters," Sharon McCollam, Best Buy's chief financial officer, said in a statement.

Analysts pressed McCollam and Best Buy chief executive Hubert Joly about their caution, but they remained firm. "We don't live on wishes and hopes here," McCollam said. "We live on what the data says."

Joly said that ultra-high definition TVs, which some analysts have expected to lure attract many buyers during the holiday season, remain above mainstream prices and will likely be a bigger item next year. Meanwhile, the company is uncertain when Apple Inc.'s new iPhone, expected to be announced on Sept. 9, will be available and how constrained the initial supply of it will be.

"You can develop the view there is upside" to Best Buy's sales for the rest of the year, Joly told the analysts. "We want to highlight factors that limit the top line."

The company early Tuesday said it earned 44 cents a share from continuing operations adjusted for one-time expenses, well above the 31 cents a share analysts were expecting. Revenue was $8.9 billion, down from $9.3 billion a year ago. Analysts had forecast revenue of $9 billion.

Sales at its U.S. comparable stores fell 2 percent. The company's shares fell about 5 percent in early trading on the New York Stock Exchange.

In May, when Best Buy reported its first-quarter earnings, executives also said they need more excitement in consumer electronics to drum up more sales. But because of an anticipated dry spell in exciting new product launches, the company said it expected same-store sales to drop in the low single-digit in the second and third quarters.

But the nation's largest electronics retailer has hoped that ultrahigh definition TVs will help boost its fortunes. In recent months, Best Buy has been rolling out hundreds of store-within-a-store concepts in partnership with Sony and Samsung in order to highlight this technology.

As it works to try to stabilize falling sales, Best Buy has been cushioning the bottom line by working to cut about $1 billion costs as part of its Renew Blue turnaround effort. As of the first quarter, it had cut $860 million.

Kavita Kumar -- 612-673-4113

 

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