NEW YORK, N.Y. – Shares of Best Buy Co. jumped on Friday after the electronics chain showed signs of starting to reverse declining sales during the critical holiday selling season, a better-than-expected result.
Shares rose 12 per cent during midday trading.
Best Buy has been facing tough competition from discounters and online retailers, as people browse electronics in stores and then go home to buy them more cheaply online, a practice known as “showrooming.” To combat this, it has instituted a cost-cutting program, invested in more employee training and put an online price matching policy in place during the key holiday period of November and December. The holiday quarter accounted for about a third of Best Buy’s revenue last year.
The chain said that revenue at stores open at least a year fell 1.4 per cent for the nine weeks ended Jan. 5. This figure is a key gauge of a retailer’s health because it excludes results from stores recently opened or closed.
The company’s U.S. performance was flat. While this was slightly below the 0.3 per cent increase Best Buy reported a year ago, President and CEO Hubert Joly said in a statement that it was an better than the past several quarters.
Best Buy tapped Joly in August to help reverse its slide. Joly has made management changes, including hiring CFO Sharon McCollam in November, and embarked on a turnaround plan.
Morningstar analyst R.J. Hottovy said the results show that some of Best Buy’s initiatives, such as increased employee training and online price matching, helped boost sales.
But he added that the company still faces bigger problems such as tough competition from sellers like Amazon.com and more and more vendors selling products to customers directly.
“Sales are incrementally positive, but Best Buy still faces an uphill battle with regard to its turnaround,” he said.
Best Buy said that sales were strongest among cellphones, tablets, electronic readers and appliances, while sales of entertainment, televisions and computer-related items dropped.
Another encouraging sign was that online revenue rose 10 per cent for the holiday period, bolstered by better traffic, an increase that shows that the chain is managing to grab its share of online buyers as well.
“While it will be a journey with ups and downs, we are focused on becoming an increasingly effective multi-channel retailer and engaging with the tens of millions of consumers who shop us online and in-store,” Joly added.
Revenue at stores open at least a year declined 6.4 per cent internationally, stung by softness in China and Canada.
Total revenue for the holiday period fell slightly to $12.8 billion from $12.9 billion.
Best Buy lost CEO Brian Dunn in April, after an investigation showed he had an inappropriate relationship with a female staffer.
That led to the departure of co-founder Richard Schulze, who knew about the relationship but didn’t report it properly, the investigation found.
Schulze stepped down, but he has been considering making a bid for the company. That bid had not materialized by the end of 2012, although Best Buy has given Schulze more time to look over its books and arrange financing for an offer.
Best Buy shares rose $2, or 16.4 per cent, to close at $14.21 Friday. That’s still close to the low end of the stock’s 52-week trading range of $11.20 to $27.95. The stock hit its lowest point of the year on Dec. 27, 2012.