Best Buy

Best Buy Co., Inc. (NYSE:BBY) posted a third quarter loss today, signaling the problems for the electronics retailer are getting more intense with no clear signs of improvement.

“In line with trends experienced over the last three years, Best Buy’s third quarter financial performance was clearly unsatisfactory,” says new CEO Hubert Joly.

The consumer electronics chain, reported a loss of $10 million, equal to 3 cents a share, after earning $156 million, 43 cents a share, a year earlier. Even after excluding one time items, the company earned 3 cents a share, far below analysts’ expectations of 13 cents a share. Revenue for the quarter fell 4.7 percent to $7.7 billion.

As per a report from Stiffel Nicolaus, “Domestic comp was positively impacted by appliances (7% of sales and +10.8% comp), and computing and mobile phones (45% of sales and +0.9% comp), and offset by entertainment (9% of sales and -18.5% comp), consumer electronics (31% of sales and -8.4% comp), and services (7% of sales and -4.6% comp). Online sales rose +10% domestically. International comp was positively impacted by computing and mobile phones (65% of sales and +2.4% comp), and negatively impacted by consumer electronics (16% of sales and -17.5% comp), entertainment (3% of sales and -16.6% comp), appliances (9% of sales and -9.4% comp), and services (7% of sales and -10.8% comp)”.

BBY 3Q12 Quick Look Grid

Same-store sales for the quarter fell 4.3 percent compared to a marginal decline of 0.7 percent last year. Best Buy Co., Inc. (NYSE:BBY) has been facing an increasing threat from e-retail, from players like Amazon.com, Inc. (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY) that have positioned themselves as lower-cost alternatives. Adding to the frustration for the retailer, buyers are using Best Buy stores as showrooms, browsing for an item and then using a smartphone to find a cheaper price online.

“The results we are reporting today only strengthen our sense of urgency and purpose,” Joly says.

A day before, new Best Buy Co., Inc. (NYSE:BBY) CEO Hubert Joly introduced a turnaround strategy called Renew Blue that includes a plan to cut costs, drive higher returns on assets, and combat showrooming. Apart from the unfavorable business environment, Best-Buy is also facing a buyout bid, from ousted founder Richard Schulze.

For the coming year, Best Buy Co., Inc. (NYSE:BBY) expects to generate $850 million to $1.05 billion in free cash flow, less than the earlier forecast of $1.25 billion to $1.5 billion. On the revised cash flow, a report from PiperJaffray says “While the reduction includes a change in restricted cash related to working capital, the lowered look raises concerns on future FCF generation and at what pace FCF might deteriorate”.

Best Buy Co., Inc. (NYSE:BBY) stock lost 8.2 percent in the early trading session.