Best Buy sees dramatic Q3 profit shrinkage
Struggles to digest Carphone Warehouse losses
US retail giant Best Buy saw Q3 profit plummet 77 per cent as consumer spending on electronic goods took a nosedive for the quarter.
The firm, in a move to cut costs, said it is offering “enhanced” redundancy packages to about 4,000 employees at its headquarters in Richfield, Minneapolis.
Best Buy said it also plans to cut capital spending by about 50 per cent in 2009.
The retailer, which has around 150,000 full-time, part-time and seasonal workers on its books, admitted it might have to lay off more people depending on how many of its corporate staff accepts the buyout.
It added that Best Buy will open “significantly” fewer stores in the US, Canada and China next year.
The company pulled in Q3 profit of $52m, or 13 cents a share, in the three months ended 29 November, significantly down on the same period a year ago when Best Buy notched up profit of $228m, or 53 cents a share.
Best Buy swallowed a massive “non-operating impairment charge” of $111m for the period related to what it described as “a significant and sustained decline in the market price of the company’s nearly three per cent stake in the common shares outstanding of The Carphone Warehouse Group PLC”.
Despite the ongoing turmoil at the firm, Best Buy saw overall revenue climb 16 per cent to $11.5bn from $9.93bn. However, sales at stores open at least 14 months dropped 5.3 per cent during the quarter.
“We believe that there has been a dramatic and potentially long-lasting change in consumer behavior as people adjust to the new realities of the marketplace,” said Best Buy CEO Bradbury H Anderson.
“We also believe that customers will continue to reward those retailers who understand their needs and desires, and offer relevant solutions at fair prices. Yet we clearly recognise that these changes require us to make significant adjustments.”
Shares in Best Buy, whose value has nearly halved since this time last year, are currently trading at 28.16, up 1.73 per cent on Wall Street. ®