Best Buy (NYSE:BBY) revealed declines in comparable first-quarter sales and swung to a loss on Tuesday as tighter cost management could not offset waning domestic demand.
The retailer also warned that investments aimed at luring shoppers back to its big-box stores will weigh on profits in the near term.
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The Richfield, Minn.-based consumer electronics retailer reported a net loss of $81 million, or 24 cents a share, compared with a year-earlier profit of $158 million, or 46 cents.
Including its recently spun-off European division, Best Buy said it earned 36 cents, topping average analyst estimates of 25 cents in a Thomson Reuters poll.
Revenue for the three months ended April 30 was $10.8 billion including its now discontinued European operations, slightly above $10.37 billion a year ago and beating the Street's view of $10.66 billion.
Same-store sales, a key growth measure of sales at stores open longer than a year, slumped 1.3% on top of a 5.2% decline a year ago, while domestic revenue fell 9.6%.
“This was the result of the Super Bowl shifting into last year’s fourth quarter as well as our decision to reduce sales in certain non-core businesses,” Best Buy CEO Hubert Joly said in a statement. “Excluding these impacts, domestic comparable store sales were flat for the quarter despite no new major product launches and late deliveries in the smartphone category.”
Shares of Best Buy fell 2% to $26.24 in premarket trade.
The company, which agreed last month to sell its 50% interest in Best Buy Europe for roughly $775 million in a streamlining move, continues to make progress on its turnaround strategy dubbed “Renew Blue."
The plan helped drive a 16% improvement in comparable online sales during the quarter, and rent negotiations helped lower its overall cost burden stemming from its suite of big-box brick-and-mortar stores.
Best Buy eliminated $175 million in annualized selling, general and administration and supply chain costs and saw restructuring costs during the quarter fall to just $6 million from $127 million in the 2012 period.
Looking ahead, the consumer electronics retailer said it remains focused on making progress on the restructuring plan announced last November and implementing the Samsung Experience Shops, which it is hoping improves its revenue per square foot.
However, Best Buy warned that turnaround efforts will continue to weigh on EPS and profit in the current period. It did not provide financial guidance for the second quarter.
Best Buy also expects to see greater negative impact from Renew Blue capital and SG&A investments in the areas of online, mobile, the “multi-channel” and the overhaul of bestbuy.com. The financial benefits from those efforts are slated to hit in fiscal 2015.