Best Buy says holiday season disappointing, stock tanks
Best Buy Co. watched its stock plunge more than 27% in morning trading Thursday after announcing poor holiday results that suffered from heavy competition and deep discounting.
The consumer electronics retailer said revenue for the nine weeks ended Jan. 4 slumped 2.6% to $11.45 billion from the same period a year earlier.
Same store sales slipped 0.9% in the U.S., though they managed at 0.1% boost internationally.
In late morning trading in New York, Best Buy stock tanked nearly 28%, or $10.45, to $27.11 a share.
Hubert Joly, chief executive of the Minneapolis chain, blamed an epidemic of deals, discounts and bargains across the industry.
“The promotional intensity that began with Black Friday continued throughout the period, which led us and our competitors to answer one question -- do we make the incremental investment necessary to be price competitive and defend our market share?” Joly said in a statement. “For us, there was only one answer.”
But the rampant price slashing “did not result in higher industry demand and had a deflationary impact on our revenue,” Joly said.
The company also struggled amid a “disappointing mobile phone market” and troughs in foot traffic.
Joly added Best Buy had trouble keeping popular products in stock. Supplies of game consoles such as the PlayStation 4 and the Xbox One, which launched during the holidays, were in short supply for many retailers.
And although categories such as computing, appliances and gaming did well, their gains were “more than offset” by declines in digital imaging, movies and MP3 players, according to Best Buy.
The company said its operating income rate in the current quarter will be 175 to 185 basis points lower than in the same period last year -- a “higher than expected cost.”
However, in a trend that’s playing out across the retail industry, Best Buy said its Internet-based sales were massively successful. Online revenue for the holiday period came in at $1.32 billion, with year-over-year comparable sales soaring 23.5%.
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