Best Buy Misses on Revenue

NEW YORK ( TheStreet) -- Shares of Best Buy ( BBY) fell in pre-market trading as the electronics retailer reported adjusted quarterly earnings that came in above Wall Street's expectations, but missed on revenue estimates.

The Minneapolis-based company said diluted earnings per share from its continuing operations were 29 cents on net earnings attributable to shareholders of $97 million. Revenue fell roughly 10% to $9.38 billion. Including its discontinued operations, the company reported a net loss of $81 million, on a loss of 24 cents a share.

Domestic comparable store sales fell 1.1% compared to the prior-year's quarter.

Wall Street expected the company to post quarterly earnings of 25 cents a share. Revenue was expected to fall by 8.3%, on average, to $10.6 billion, Yahoo! Finance says.

The stock was down 1.9% to $26.30, roughly an hour before the market opened.

Also see: Wal-Mart Misses, Kohl's Beats, Stocks React

Last month the company said it sold its 50% stake in five-year-old joint venture, Best Buy Europe, with London-listed Carphone Warehouse Group in a deal valued at $775 million.

Also see: Best Buy Surges on Exit from European Joint Venture

Hubert Joly, Best Buy's president and CEO, attributed the lower first-quarter domestic comparable store sales to the Super Bowl shifting into the company's fourth quarter as well as its decision to exit the European joint venture.

Still, even excluding the two events, sales were flat compared to a year earlier. The lack of no new major product launches and late deliveries in smartphones during the quarter contributed to the flat sales.

"During the second quarter, we will, in particular, complete the deployment of the Samsung Experience Shops and make significant progress in our efforts to optimize the allocation of our retail floor space to more attractive product categories, so as to increase revenue and operating profit per square foot," Joly said.

Also see: Best Buy, Samsung Get Experienced

Sharon McCollam, Best Buy's CFO, didn't assuage investors that the second quarter would be much improved.

"As we look forward to the second quarter, while not providing financial guidance, we believe that the ongoing investment in price competitiveness that contributed to our gross profit and EPS declines in the first quarter will continue into the second quarter," McCollam said in the earnings release.

"Additionally, disruptions caused by the physical deployment of the Samsung Experience Shops and the optimization of our retail floor space are expected to have operational impacts during the second quarter," McCollam said.

The company continued to make substantial progress on its Renew Blue initiative.

Joly pointed to Renew Blue improvements that included: a 16% increase in domestic comparable online sales; improving customer Net Promoter Score by over 300 basis points over the last five months; reaching an agreement with Samsung to establish Samsung Experience Shops in retail stores and beginning to roll those out; negotiating overall rent reductions for a number of stores and closing one large format store; and eliminating $175 million in annualized costs between Selling, General & Administrative expenses and supply chain costs, bringing the total to $325 million of eliminated costs since the initiative began.

The company identified at its analyst day in November a total of $725 million in reduced expenses through its domestic business.

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.

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