Best Buy released the earnings results from its third quarter of fiscal 2016 before opening bell this morning, posting adjusted earnings of 41 cents per share and revenue of $8.82 billion. Analysts had been looking for earnings of 35 cents per share and $8.86 billion in revenue. In last year’s third quarter, the electronics retailer reported revenue of $9.03 billion and adjusted earnings of 34 cents per share.
Best Buy’s U.S. locations underperform
Reported earnings rose to 36 cents per share from 30 cents last year. Domestic same store sales grew 0.5%, coming up far short of the consensus estimate for growth of 1.5%. Domestic online comparable sales increased 18% due to improvements to the retailer’s mobile website and “overall enhanced dotcom capabilities,” which management said drove higher rates of conversion and more traffic. Domestic segment revenue rose 1.2% year over year.
Domestic comparable enterprise sales declined to $8.09 billion from $9.03 billion, while international enterprise sales fell to $729 million from $1.04 billion.
Best Buy expects enterprise revenue to decline
Management warned that Best Buy faces difficult comparisons for the fourth quarter this year.
“We of course recognize that we are up against a strong performance in the fourth quarter of last year and that the NPD industry declines that we saw in the third quarter, both sequentially and year-over-year, may continue throughout this year’s fourth quarter,” said Best Buy Chairman and Chief Executive Hubert Joly in a statement. “We have also made incremental investments in services pricing and SG&A that are putting pressure on our fourth quarter earnings outlook.”
The retail chain expects enterprise level revenue for the fourth quarter to decline in the low single digits. Management reported that throughout the third quarter, sales of NPD-reported categories got worse and worse as the quarter wore on. As a result, they expect Bes Buy’s non-GAAP revenue to remain roughly flat versus the expectations of a 4% decline in the industry for NPD-reported categories, which would place this metric in line with the third quarter revenue.
Shares of Best Buy plunged in premarket trading this morning, falling by as much as 8.33% to $28.73 per share.