Looks like Best Buy Co.'s new chief executive has his work cut out for him, with the electronics retailer's profit falling 91% and its stock plunging to a nine-year low.
The sour earnings report came the day after Best Buy announced Hubert Joly, head of Radisson and T.G.I. Friday's parent Carlson Cos., as its new chief executive.
The Frenchman brings "expertise in turnaround and growth" at "a critical moment," Best Buy said during the reveal. On Tuesday, the company said its net income in its second quarter, which ended Aug. 4, slid 91% to $12 million, or 4 cents a share, from $128 million, or 34 cents a share, during the same period last year.
Revenue dropped 3% to $10.5 billion. The company's stock sank to nine-year lows, plummeting as far as $16.23 a share in morning trading after closing at $18.16 a share on Monday.
Best Buy suspended future earnings projections for the rest of its fiscal year, noting Joly's appointment as well as "lowered expectations for industry-wide sales and the uncertainty associated with several key product launches" in the next six months.
Joly will take over next month, heading up a company attempting a hard refresh. Best Buy has been slammed by rivals such as Amazon.com. A personal conduct scandal in the spring forced the business to cycle through three chief executives in half a year. With sales sliding, the company has had to rethink its large-format stores, closing some down and reworking others. Founder and former chairman Richard Schulze is attempting to take Best Buy private.
For a while last summer, Best Buy shares were trading in the $30 range, but the stock has been steadily sliding since the fall of 2010.
From last year, the company shrunk its total big box square footage in the country by 4%. The steady decline in same-store sales slowed domestically, falling 1.6% compared to their 3.7% dive in the previous quarter.
But abroad, same-store sales tanked 8.2%. Revenue is slipping in China and Canada and increased competition is squeezing the company in Europe.
Online, however, Best Buy is still making headway, with domestic Web-based revenue growing 14% on good sales of tablets, mobile phones, appliances and e-readers. The retailer is losing steam in other sectors, however, including gaming, digital imaging, televisions and notebooks.
"In the U.S., economic conditions are soft and will probably remain so for the indefinite future," said Interim Chief Executive Mike Mikan in a conference call with analysts. "Consumers remain very cautious and sales in the industry may be dampened at the moment by those who are holding back on spending as they await some highly anticipated new technology releases. Like virtually every other competitor in the consumer electronics sector, Best Buy's second quarter reflects these realities."