The Minneapolis-based firm said that non-GAAP diluted earnings per share from continuing operations rose 19% to 44 cents a share in the quarter that ended April 30, far exceeding Wall Street estimates for 35 cents, according to TheStreet. Total revenue fell 1.3% from the prior year to $8.44 billion, but surpassed forecasts for $8.29 billion.
GAAP diluted EPS was 69 cents a share, up from 10 cents a share one year ago.
“Our teams delivered a strong first quarter, with better-than-expected revenue, improved profitability, and progress against our fiscal 2017 initiatives,” Best Buy’s chairman and chief executive Hubert Joly said in a press release.
However, the company expects that sales in the second quarter will be flat, and that non-GAAP diluted earnings per share will be in the range of 38 cents to 42 cents a share. Wall Street expected 50 cents a share, according to The Street.com.
“The tepid outlook from Best Buy comes after similarly downbeat forecasts from bricks-and-mortar retailers such as Target that have seen a spending slowdown post-Easter,” TheStreet wrote.
One of the factors that will negatively impact earnings in the second quarter is inventory shortages in digital imaging products, Best Buy said. “We are now expecting an approximate $0.03 to $0.04 negative impact due to the April 2016 earthquake in Japan, which is impacting inventory availability in this high-margin category,” the company said.
However, Best Buy still expects full-year sales and operating profit margin to remain unchanged from the prior year, as sales may pick up in the second half from the introduction of the new Apple iPhone and Apple Watch.
TheStreet’s Jim Cramer said that Best Buy should do very well for all of 2016, buoyed by sales of the iPhone 7, which comes out at the end of the year.
This is an area that’s very challenged, this electronics and home area,” Cramer said.
In a separate press release, Best Buy announced that McCollam would be stepping down as CFO and chief administrative officer on June 14, “as part of an internal succession plan.” She added that she would be retiring to spend more time with her husband, but would remain with Best Buy in an advisory capacity until the end of the fiscal year (Jan. 28, 2017) to ensure a seamless transition.
Corie Barry, a 16-year veteran of Best Buy and its current chief strategic growth officer, will become the company’s chief financial officer at the conclusion of Best Buy’s annual shareholder meeting on June 14.
“Sharon came out of retirement in 2012 to help revitalize the company when it was facing a multifaceted crisis,” Joly said. “Three and a half years later, we are in a completely different place and are into the next phase of our journey as a company. Sharon can leave with a sense of confidence in the future of the company and certain that her legacy will endure.”
When McCollam took over as Best Buy finance chief in December 2012, she found that the company’s SG&A expenses were too high. By the end of the first quarter of 2013 she had cut $150 million in costs, in part by laying off 400 employees.
For the 12 months ending April 30, Best Buy’s SG&A expense line was $7.54 billion, down from $8.57 billion in February 2013, according to data from S&P Capital IQ. In the same time period, the company’s 12-month revenue declined to $39.4 billion, from $41.7 billion three years ago.