MINNEAPOLIS-A drop in sales and reduced margins from aggressive pricing put Best Buy in the red in its fiscal first quarter.
The electronics retailer posted a loss of $81 million, compared to net income in last year’s first quarter of $158 million. Net sales in the quarter, which ended on May 4, fell 9.6 percent to $9.4 billion, which included a decline in same-store sales of 1.1 percent for Best Buy’s U.S. stores, along with a drop of 2.8 percent in international same-store sales. The company did boost its comparable online sales by 16.3 percent.
Gross margin lost 180 basis points to finish the quarter at 23.1 percent, due to Best Buy’s investment in price competitiveness, which included the increased promotional activity in mobile phones and computer products. Selling, general and administrative expenses were down 9 percent in dollars, but rose 20 basis points as a percentage of sales to 21.3 percent.
Hubert Joly, Best Buy’s president and CEO, said in spite of the loss, the first quarter brought progress in the retailer’s Renew Blue program, its effort to revive its business. Joly cited the strong gain in online sales, the establishment of Samsung Experience Shops in the stores, negotiating overall rent reductions for a number of stores and eliminating $175 million from its SG&A and supply-chain costs.
Joly also said the second quarter would bring further progress in these initiatives, including “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.”