Best Buy Co. (BBY) joined the chorus of retailers seeing improvement in their tea leaves, despite lower sales and profits this quarter and missing Wall Street's expectations.
The leading electronics retailer posted net income of $158 million for the quarter ended August 29, down from $202 million. Earnings per share dropped to 37 cents, down 22.9 percent from 48 cents last year. Best Buy CEO Brian Dunn said the results were in line with expectations, but analysts had expected 42 cents per share.
Revenues rose to $11.02 billion, up from $9.8 billion last year, but that gain came thanks to the inclusion of Best Buy Europe, which the parent company acquired last year. Same store sales were down 3.9 percent for the quarter.
But Best Buy management said traffic and sales improved through the month and the chain has gained market share this year, thanks in part to the demise of chief rival Circuit City late last year. Executives said Best Buy gained 2.7 percent in market share in the three months ended July 31, accelerating a two percent gain in the first quarter.
Best Buy raised its earnings guidance for the rest of the year, to $2.70 to $3 per share for the full fiscal year, up from $2.50 to $2.90 per share previously.
Jim Muehlbauer, senior VP of finance, said the 3.9 percent decline in sales was better than a drop of 4.9 percent in the first quarter and that sales declines shrank each successive month during the second quarter as store traffic stabilized and increased slightly.
The stable traffic is a good omen for the holiday season, better than the weekly changes in traffic Best Buy saw in the latter half of last year, said Muehlbauer. "It seems customers are finding a rhythm in how they're going to use their discretionary spending," he said. "Seeing that traffic stabilize . . . is a very encouraging sign."
Best Buy executives said the best-performing areas were those where customers required help with selection and installation. Stores saw sales declines in games and appliances and increases in computing and mobile phones, Muehlbauer said.