Best Buy tops 4Q profit estimates

Electronics chain cut expenses, increased online sales

A customer looks at Eskuche headphones at a Best Buy Co. store in Northbrook, Illinois, U.S., on Monday, Dec. 23, 2013. 2013. U.S. shoppers flocked to stores during the last weekend before Christmas as retailers piled on steeper, profit-eating discounts to maximize sales in their most important season of the year. Photographer: Tim Boyle/Bloomberg
A customer looks at Eskuche headphones at a Best Buy Co. store in Northbrook, Illinois, U.S., on Monday, Dec. 23, 2013. 2013. U.S. shoppers flocked to stores during the last weekend before Christmas as retailers piled on steeper, profit-eating discounts to maximize sales in their most important season of the year. Photographer: Tim Boyle/Bloomberg

NEW YORK - Best Buy Co., the world’s largest electronics chain, posted fourthquarter profit Thursday that topped analysts’ estimates after cutting expenses and getting more of its sales from the Internet.

Profit was $293 million, or 83 cents a share, in the quarter that ended Feb. 1, compared with a loss of $409 million, or$1.21, a year earlier, the Richfield, Minn.-based company said in a statement. Earnings from continuing operations were $1.24 a share. Analysts had projected $1.01 a share, the average of 24 estimates compiled by Bloomberg.

Chief Executive Officer Hubert Joly is working to cut $1 billion in annual costs, up from an earlier target of $725 million, by improving the company’s supply chain and reducing the number of products that get returned or damaged. Domestic online sales also jumped 26 percent last quarter, helping offset declines at stores.

“They get credit for doing all they can on cutting costs,” Brian Yarbrough, an analyst with Edward Jones & Co. in St. Louis, said in an interview. “But at some point they will run out of cost savings and will have to find a way to grow the business.”

Best Buy’s shares more than tripled in 2013 as the CEO cut costs and revived sales by dedicating more space to brands like Samsung Electronics Co. He also has instituted a price-matching policy to compete with Amazon.com.

Joly outlined the company’s strategy over the next two years on a conference call with analysts, saying Best Buy would focus on additional cost cutting, adding more areas in stores dedicated to specific vendors and improving marketing by making it more personalized.

Sales will continue falling in the first half of this year, hurt by an industry-wide slump in demand for consumer electronics, the company said.

Revenue generated by electronics in the United States declined about 3 percent during the fourth quarter, Best Buy said, citing researcher NPD Group.

While Christmas discounts narrowed domestic profit margins to 20 percent from 22.3 percent last quarter, Joly said in January that Best Buy will continue the practice. Online sales now account for almost 13 percent of the domestic total, the company said during a conference call.

Total revenue, meanwhile, fell for a fourth straight quarter. Sales fell 3 percent to $14.5 billion in the period, missing the estimate of $14.7 billion.

Same-store sales dropped 1.7 percent internationally and 1.2 percent in total. Analysts had projected a decrease of 0.8 percent.

Business, Pages 27 on 02/28/2014

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