USA: Mobile lifts Best Buy in Q1

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Consumer electronics retailer Best Buy said mobile performed well for the company in its first quarter results for the fiscal year 2010/11.

In the three months to May 29, 2010, Best Buy reported revenue of $10.8 billion with net earnings of $155 million, compared to $10.1 billion and $153 million in the three-month period to May 30, 2009.

Best Buy said overall it benefited from a 2.8 per cent rise in comparable store sales, net new stores and favourable foreign currency exchange rates, while online revenue grew by 26 per cent year-on-year in the first quarter period.

Domestically, revenue was up five per cent to $7.9 billion and comparable store sales gained 1.9 per cent. Best Buy recorded low double-digit comparable store sales increases in mobile phones, notebook computers and appliances, partially offset by store sales decreases in gaming, music and movies.

The domestic gross profit rate during the quarter grow by 60 base points to 25.7 per cent, which the company attributed to strong growth in Best Buy Mobile, effective promotions and other factors.

Revenue from the international segment increased 11 per cent to $2.9 billion thanks to favourable foreign currency fluctuations, a 6.3 per cent comparable store sales increase and new stores opening in the last 12 months. Minus currency fluctuations, the revenue increase was pared back to 1.4 per cent.

This included Best Buy Europe reporting a five per cent increase in comparable store sales due to a higher mix of mobile contract connections, and Best Buy China seeing comparable store sales up 30 per cent thanks to the growth of the Five Star brand. Operations in Canada saw comparable store sales decline two per cent as consumer spending remained soft.

Selling, general and administrative (SG&A) costs grew by 110 base points, or 1.1 per cent, to 23 per cent due to new store openings, other investments, discretionary expenditure and non-recurring items.

Operating income was $313 million, up from $296 million in 2009, but down 10 per cent when compared with adjusted operating income of $348 million in the prior-year period.

The domestic segment reported fiscal first quarter operating income of $298 million, a decrease of nine per cent when compared with adjusted operating income in the prior-year period as SG&A spending growth outpaced revenue growth and the increase in gross profit dollars.

The international segment generated operating income of $15 million for the fiscal first quarter, a decrease of 25 per cent when compared with adjusted operating income in the prior-year period. Operating income improvements in Best Buy Europe and Canada were offset by declines in other international operations.

Best Buy chief executive officer Brian Dunn said: “There were many positive indicators in the first quarter, highlighted by the excellent performance of Best Buy Mobile.

“These indicators, coupled with the business model changes we are making to create better solutions for the millions of connectable devices we sell, give me confidence in our ability to achieve our financial goals this year.”

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