Best Buy suspends profit forecast as earnings decline
- 21 August 2012
- From the section Business
Struggling US electronics chain Best Buy has reported a dramatic fall in profits.
Net profits plunged to just $12m (£7.6m) on revenues of $10.6bn in the second quarter. Profits were $150m in the same period a year earlier.
The profit fall was exacerbated by a $91m one-off charge, primarily related to cost of closing stores.
Best Buy said uncertainty over its future sales meant it could not provide any guidance on its full-year profits.
The company, which owns 50% of UK-mobile phone chain Carphone Warehouse, has also suspended share buybacks.
The two opened 11 Best Buy outlets in the UK in 2010, but they all closed a year later.
Best Buy's shares, which have lost almost 70% since their peak of $56.66 in May 2006, fell another 4% after the latest financial results.
The firm is struggling to compete with online rivals such as Amazon which are able to sell goods cheaper.
In March, Best Buy announced a major restructuring that included closing 50 stores, cutting 400 corporate jobs and trimming $800m in costs.
Despite these changes, sales have continued to fall.
Sales at stores open at least 14 months fell 3.2% in the three months to 4 August, including a 1.6% drop in the US and an 8.2% fall in international sales.
This means same-store sales have now fallen in eight out of the past nine quarters.
The firm said on Monday that talks with the firm's founder, Richard Schulze, over taking the company private had broken down.
Best Buy said that Mr Schulze had rejected an offer to conduct due diligence on the deal.
Mr Schulze, who owns just over a fifth of Best Buy, had wanted to buy the rest of the chain for between $24 and $26 a share.
He said he was "shocked" and "disappointed" that discussions over a possible buyout had broken up.
Best Buy has been trying to cut costs to improve its profit margins.
It said in June that one of its priorities was to stop its large stores simply becoming a showroom, where shoppers browse electronic products, but then buy them cheaper online.
Best Buy has seen annual declines in revenue at stores open at least a year for two of the last three years.