Best Buy Co. Inc. (NYSE: BBY) should have hoped founder Richard Shulze might have bought the firm as he considered its financial status. Now, it may be too late. Best Buy offered the kind of earnings warning that indicates a firm is in full-scale collapse. Although, in Best Buy’s case, that process has been underway for the better part of two years. Amazon.com Inc. (NASDAQ: AMZN), other online consumer electronics stores and all the aisles of electronics sold by places like Wal-Mart Stores Inc. (NYSE: WMT) and Costco Wholesale Corp. (NASDAQ: COST) have just about put Best Buy beyond rescuing.
The company is providing an update on its expected results for the fiscal third quarter ending November 3, 2012. Comparable store sales are expected to decline at a rate consistent with the range of results for the first two quarters of fiscal 2013 (-5.3% in the first quarter and -3.2% in the second quarter). Gross profit rate is expected to decline at a rate similar to that experienced in the fiscal second quarter of 2013, with a decline of more than 100 basis points compared to the prior-year period, due to the impact of product mix and product transitions in advance of several key new product launches. The company expects SG&A expense percentage growth to be in the low single digits over the prior-year period, due to investments related to the company’s strategic focus on improved customer service (including increased training and higher compensation costs for sales associates). As a result, the company expects fiscal third quarter adjusted (non-GAAP) earnings per diluted share will be significantly below the prior-year period.
Best Buy also bounced some management, although it is a bit late for that. “The current president of Best Buy’s U.S. business, Mike Vitelli, will retire from the company at the end of the fiscal year.”
All that is left is for the coroner to pick up the body.
Douglas A. McIntyre