Best Buy stock sinks on soft forecast, CFO exit

Dive Brief:

Best Buy managed to beat expectations for its first quarter results, reporting earnings of $229 million, or 70 cents per share compared to its year-ago earnings of $129 million, or 36 cents per share. Adjusted earnings were 44 cents per share, well past estimates from Zacks Investment Research for 35 cents per share.
Revenue fell to $8.44 billion from $8.56 billion year over year, besting analyst expectations of $8.29 billion. Same-store sales in the quarter fell just 0.1%, against Best Buy's own expectations of a 1% to 2% decline, buoyed by online sales, which grew 24% in the quarter.
Shares of Best Buy, up 8.4% so far this year through Monday’s close, nevertheless dropped 4.1% to $31.65 in premarket trading Tuesday after the electronics chain released a soft profit forecast for the current quarter and announced that Chief Administrative and Chief Financial Officer Sharon McCollam will step down, with 16-year Best Buy veteran and Chief Strategic Growth Officer Corie Barry replacing her as CFO.

Dive Insight:

Though Best Buy beat expectations for the quarter, CEO Hubert Joly said that it would rein in guidance for the second quarter and the full year, in part because of a saturation in smartphone sales. Joly also cited declining demand for mobile device sales in connection with Best Buy's disappointing Q4 earnings, offset at that time by strong consumer interest in health products, wearable devices, home theater systems and appliances.

Best Buy is not alone. In its Q1 report earlier this month, Target noted that subdued sales of electronics added to its woes, while Apple last month similarly reported its first revenue decline in 13 years.

"As we look forward, we remain focused on our FY17 priorities… (1) to build on our strong industry position and multi-channel capabilities to drive the existing business; (2) to drive cost reductions and efficiencies; and (3) to advance key initiatives to drive future growth and differentiation,” Joly said in a statement Tuesday. “We are investing to make it easy for customers to learn about and enjoy the latest technology as they pursue their passions and take care of what is important to them in their lives. With our combination of digital, store and in-home assets, we feel we have a great opportunity to address key customer pain points, build stronger ongoing relationships with our customers and unleash growth opportunities.”

Best Buy also announced that CFO McCollam will step down on June 14, corresponding with the company's annual shareholder meeting. She will remain with Best Buy in an advisory capacity until the fiscal year ends on Jan. 28, 2017.

Barry will assume CFO duties at the conclusion of the June shareholder meeting, succeeded as chief strategic growth officer by Asheesh Saksena, who was most recently the executive vice president of strategy and new business development for Cox Communications. Best Buy will split McCollam’s duties as chief administrative officer among several members of the company’s executive team.