Best Buy reported a 77% jump in quarterly profit Tuesday, as the electronics retailer reported strong sales growth in the U.S. Market during the key holiday season. The strong results led the retailer to raise its dividend and unveil a share buyback plan. Here are some of the key points from the company’s earnings report.
What you need to know: Best Buy (BBY) outperformed in its home market, where the traditional brick-and-mortar retailer has faced a tough challenge from online competitors such as Amazon.com (AMZN). The company on Tuesday said U.S. Revenue increased 3.2% in the fourth quarter ended Jan. 31, despite a 3.2% drop in sales of consumer electronics according to research firm NPD Group.
Earlier this year, Best Buy indicated it had a happy holiday, when the retailer said it sold more large-screen TVs and mobile phones than in the prior year. One benefit to Best Buy’s sales has been a huge lift from installment billing, a relatively new offering that allows mobile phone users to upgrade to the latest smartphone and spread their payments over time. Those plans are more costly than traditional contracts, which subside the cost of a new phone, but keep consumers locked into using that device for two years. Best Buy’s U.S. Same-store sales grew 2.8%, but would have risen 2% without the boost from installment billing.
The big number: Net earnings climbed to $519 million from $293 million last year, with adjusted per-share earnings climbing to $1.48 from $1.20. Wall Street analysts had expected $1.35 in per-share earnings. Total revenue grew 1.3% to $14.21 billion, less than the $14.34 billion projected by analysts. Results were hurt by a steep 12% drop for Best Buy’s international business, which was stung by the stronger U.S. Dollar, and store closures and weak industry demand in Canada.
What you might have missed: Best Buy’s President and CEO Hubert Joly said the retailer has made progress in addressing two main problems that were outlined in late 2012: declining same-store sales and falling operating income. The company has made progress reporting growth, and as a result it has increased its quarterly dividend payout by 21% and announced share buybacks. Gap (GPS) and Urban Outfitters (URBN) are among the other retailers that have announced share-buyback plans along with their fourth-quarter results.
Joly also said Best Buy would be investing in its business this year, saying that while the move will pressure operating income, it is needed to stay competitive in the electronics category.
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