Best Buy profit surges to $266M, stock jumps

Best Buy’s cost-cutting efforts widened its second-quarter profit to $266 million, up from $12 million last year.

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The company reported earnings of 77 cents a share Tuesday compared with 4 cents a share in a year-ago period.

The struggling retailer beat Wall Street expectations and shares jumped about 10.4% in early trading. The stock is trading at levels not reached since mid-2011.

Best Buy has been cutting costs and revamping stores to offset tough competition from discounters and online retailers. Under CEO Hubert Joly, the company has instituted a price-matching policy, opened more dedicated areas for manufacturers such as Apple and Samsung and invested more to train employees.

The electronics chain is especially winning online, where sales increased 10.5% with revenue of $477 million. Best Buy said in a release that this was due to increased traffic and a higher average order value.

“The sales number is even more impressive considering Best Buy’s entirely new website won’t launch until 2014, leading me to believe that price matching, and advertising of price matching, is closing the price perception gap with Amazon,” wrote Belus Capital Advisors CEO Brian Sozzi.

Sales at stores open at least a year declined 0.6%. That’s an improvement over last year though, when same-store sales were down 3.3%.

Earnings were 32 cents per share excluding one-time items, much better than the 12 cents per share that analysts had been looking for, according to a poll by FactSet.

Revenue fell slightly to $9.3 billion, from $9.34 billion last year. Analyst expected $9.13 billion.

There will be some pressure during the second half of the fiscal year due to price cuts and marketing costs, said Chief Financial Officer Sharon McCollam, as well as a temporary increase in mobile warranty costs and changes in its private label credit-card agreement with Capital One.

However, those costs will be offset by $390 million in annual savings from cost cuts, McCollam said.

Shares rose to $33.95 in premarket trading. The stock has traded between $11.20 and $32.17 over the past 52 weeks.

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Eric Write head editor and chief at The Pluto Daily