Best Buy Co., Inc.(NYSE:BBY) reported its second quarter earnings today. The research wing of Citigroup Inc. (NYSE:C) remains neutral on the electronics retailer, after its disappointing results. Citigroup Inc. (NYSE:C) said it was expecting an earning per share of 34 cents, but the actual EPS of Best Buy Co., Inc.(NYSE:BBY) came at 20 cents. The Minneapolis-based firm earned $124 million in operating income on a revenue of $10.5 billion. Revenues have declined 3 percent, and profits are down 52 percent from the same period last year.
Another worry Citigroup Inc. (NYSE:C) notes, is the suspension of the stock repurchase program. Best Buy Co., Inc.(NYSE:BBY) has also declined to give out earnings guidance for the rest of the year. The struggling retailer has appointed Hubert Joly as its new CEO, and he will start working in September. Citi analysts expect to hear a restructuring plan from the newly appointed CEO in the first half of 2013. The retailer is still uncertain about the launches of many important products later this year.
Citigroup Inc. (NYSE:C) said in its report that the key earnings catalysts will be the additional information about the new CEO, the restructuring plans, category-wise sales momentum, and the company’s share buyback programs. Best Buy Co., Inc.(NYSE:BBY)’s cash cushion declined 67 percent this year to $680 million.
Meanwhile, the tough earnings have strengthened the hopes of its founder and ex-chairman, Richard Schulze, to buy back the company. He argues that Best Buy should start negotiations with him before it loses even more value. He had earlier proposed to purchase Best Buy in a deal worth approximately $8.5 billion, i.e., $24 to $26 per share.
However, Best Buy said it trusts and relies on the new CEO for the company’s turnaround. The company said Hubert Joly is a proven turnaround expert, and he has demonstrated his capabilities by reviving Electronic Data Systems and VIVENDI (BIT:VIV). All that Best Buy needs is the time to carry out its restructuring plans. Unfortunately, investors don’t seem to be equally enthusiastic. Best Buy stocks declined over 10 percent within hours of announcing Hubert Joly as the new CEO on Monday.
Best Buy closed at $18.16 on Monday. Citi analysts have set a target price of $21 per share. At the time of this writing shares of Best Buy are down 1% to $17.18