Best Buy 3Q Numbers Disappoint

Best Buy issued disappointing third-quarter results Tuesday despite strong holiday sales as the discounts the chain offered to bring in holiday shoppers squeezed profit margins. While Best Buy’s biggest rival in the electronics retail sector, Circuit City, filed bankruptcy half a year ago, the chains still faces stout competition from online retailers, in particular, as well as discount superstores like Wal-Mart and Target.

In order to lure in shoppers on Black Friday, the traditional kickoff to the vital holiday shopping season, Best Buy offered steep discounts on items such as smartphones, laptop computers and flat screen televisions. The company even issued a price match guarantee, in which it offered to sell any of its products at the same price as its rival brick-and-mortar stores advertised. Furthermore, the chain also offered free shipping.

In the three months ended November 26th, Best Buy said it earned $154 million, or 42 cents a share, down from a profit of $217 million, 54 cents a share, in the same quarter a year ago. Excluding certain one-time items, earnings were 47 cents a share, 4 cents lower than the consensus estimate of analysts in a recent Thomson Reuters survey. Revenue, meanwhile, rose to about $12.1 billion, just short of the $12.14 billion analysts had projected, as lower profit margins ate into the company’s increase of 0.3 percent at stores open at least 14 months.