Best Buy sees profits fall - PC Retail

Best Buy sees profits fall

Despite decline, revenues strong with Best Buy Europe expected to generate ?1.8bn by year-end
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Best Buy has seen its second quarter profits fall by 19 per cent, with the retailer citing store openings and improvements, as well as the roll out of its mobile operations as the cause of the decline.

Despite the fall, revenues were up for the retailer by 12 per cent to $9.8bn (£5.5bn), driven by 156 new store openings and a 4.2 per cent increase in same store earnings.

It was an increase from the $8.8bn (£4.9bn) the company posted during the same period last year, despite continued concerns over the health of the US economy.

During its investor conference call, chief financial officer James L. Muelbauer revealed that the firm expects Best Buy Europe to generate $3.2bn (£1.8bn) in revenue from July to December. That figure does not include revenues generated from any planned Best Buy stores, which are not due to open until January.

He added that the firm would be reporting Best Buy Europe's quarterly results on a two-month lag compared to the rest of the chain.

Consumer electronics continue to provide the majority of Best Buy's revenues, with sales of televisions driving growth as US consumers move over to flat panel digital sets in anticipation of that country's digital switchover. The firm revealed that sales of MP3 players had dipped below last quarters figures.

IT sales continued to catch up to its consumer electronics business, accounting for 34 per cent of its second quarter profits. Despite the increase, Muelbauer warned that margins were being eroded and continued growth of this sector could see it begin to impact the firm's profits.

He echoed that warning for its video games business, which remained static at 16 per cent, with Muelbauer blaming price erosion for the lack of revenue growth, but adding that the volume of video game products had continued to grow at a strong rate.

Its online business also saw continued growth, with US sales increasing by 32 per cent during the period.

"In a challenging environment that finds many of our competitors retrenching, we are growing and opening more new stores," said Best Buy's chief operating officer Brian Dunn in a statement.

"We believe it's prudent for strong companies to distance themselves from their competitors during tough times. We know that when the world's most resilient economy rebounds, we'll be well positioned to benefit from it."

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