Best Buy Returns to Profit

Updated from 9:20 a.m. EDT

Best Buy's(BBY Quote - Cramer on BBY - Stock Picks) keen focus on customers could help it maintain robust same-store sales for the rest of the year, even as comparisons get increasingly difficult.

On Wednesday, the electronics retailer said it swung to a first-quarter profit from a loss a year ago, helped by expense management and strong sales. The company also forecast second-quarter earnings within the range of analysts' projections.

Nevertheless, shares of Best Buy were lately down $1.43, or 2.7%, at $51.65 in Wednesday trading.

Net earnings for the three months ended May 29 were $114 million, or 34 cents a share, compared with a loss of $25 million, or 8 cents a share, in the year-ago quarter.

Earnings from continuing operations were $114 million, or 34 cents a share, compared with $69 million, or 21 cents a share, in the year-earlier period. On that basis, analysts were calling for 33 cents a share.

As the company reported on June 3, first-quarter sales increased 17% to $5.47 billion with same-store sales up 8.3%, helped by an increase in customer traffic.

Selling as well as general and administrative expenses improved to 22% of total sales in the latest quarter from 22.9% last year.

Gross profit as a percentage of sales was 25.4%, flat with the prior-year quarter. An improved product assortment and more effective promotions helped gross profit, Best Buy said, while its customer loyalty program, called Reward Zone, hurt gross profit by 0.8%. The amount of loyalty program members increased, which in turn increased the rate points earned that were redeemed. Reward Zone purchases make up about 25% of total purchases, the company said.

"Reward Zone members are shopping nearly twice as often as nonmembers," Best Buy said. "When they come in, they're spending more than two times as much as non-members."

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