The world's highest-earning e-retailer is suffering from weak day-to-day consumer spending and changing shopping habits.
Recently, Best Buy company released earnings, in the first quarter of the new fiscal year for the year to May 28, the company Net Profit of $ 136 million, a year-on-year decline of 12.2%; gross profit rate from 25.9% year-on-year fell to 25.3%; same-store sales in the quarter also fell 1.7%, which is the United
Investors were slightly relieved that Best Buy's net revenue rose 1.4 percent to $ 10.9 billion, slightly above the $ 10.71 billion expected by analysts on average. Best Buy said This was largely due to strong sales of smartphones, mobile communications services, and tablets, making up for weakness in the TV business. Mobile phone sales, including smartphones, surged 28 percent in the quarter, data showed.”I think we've had a good start to the fiscal year, “said Best Buy CEO Brian Dunn.”
However, in response to changes in consumer buying habits, Dunn had to spend more money on product promotions, although revenue rose, the profit side is under pressure. The negative impact of Housing and employment has left everyone clutching their wallets, and consumers are still reluctant to spend their money on bulky products, industry analyst Jonathan Berg said.
On the other hand, the traditional retail giant is still struggling to adapt to the growth of online shopping and the new trend of rapid product updates. Best Buy is poised to focus on its online business and shrink some of its stores, with online sales up 12% in the first quarter. Dunn revealed that they have begun to negotiate with U.S. chain store owners to reduce storage space.
American consumers, however, remain cautious. David Hicke, an investment analyst, noted that consumer electronics retailers are under pressure from discounters and online stores, adding to the pressure.
Business mixed
On June 21, Best Buy announced plans to buy back $ 5 billion of common stock and raise its quarterly dividend by 7%. The company's shares have fallen 16 percent so far this year. Analysts generally believe that the buy-back and improved dividends are designed to restore investor confidence. Best Buy currently has $ 2.2 billion in cash flow.
Best Buy's sales have continued to decline over the past four quarters. Nonetheless, optimists point out that Best Buy can provide stable cash flow, maintain profitability and pay dividends. Credit Suisse analyst Gary Barter said that despite the challenging sales environment, we believe the company has taken the appropriate steps to adjust, " and its position is very accurate and the stock may be well-received."
Notably, Best Buy has been looking to expand its international business-with overseas sales contributing nearly 30 percent, but the company's same-store sales in Europe and Canada fell in the first quarter, according to the report. As a result, there is speculation that Best Buy, or having to re-evaluate their overseas strategy, may stop the pace of expansion this year.
The Financial Times recently reported that Best Buy plans to close 11 stores in the UK. The stores are a joint venture between Best Buy and British retailer CarphoneWarehouse.In 2008, Best Buy acquired a 50% stake in the largest mobile phone retailer in Europe. Two years later, Best Buy opened its first flagship store in Europe under the“big box” scheme. Then, Best Buy in the United Kingdom has set up a number of chain stores.
However, CarphoneWarehouse reported a preliminary profit of £ 62m in the year to March 2011.Carphone warehouse CEO Roger Taylor said all options were on the table and closing those stores could save Best Buy £ 40m on property leases. He also acknowledged that closing the stores may not be the best option, but so far they have not signed a new lease agreement with U.S. partners.
According to Best Buy's plan, 80 large chain stores should be established in the UK by 2013, and now they need to rethink their plans. Best Buy management has hinted that the goal of opening 80 stores in the current environment may not be realistic.
Best Buy is not the only electrical retailer to have suffered a blow in the UK market. On June 22, British electronics retailer KesaElectricals said its 2011 fiscal year net profit fell 29%to 32 million euros and plans to close 17 stores in the next three years. And another retail giant, Dixons Carphone, has issued two difficult earnings warnings this year.
Fortunately, there is support from the Chinese market. Best Buy said international revenue growth in the quarter was driven by the continued strong performance of its Chinese business.
Best Buy in China sub-brand Five-Star appliances performance is remarkable, the first quarter comparable store sales growth of more than 9%, and in the last year has been increased by 35%, based on operating profit increased significantly. Best Buy said that nothing can shake up the company's determination to develop in China, the company will continue to vigorously develop in China Five Star appliances and Best Buy brand. By the end of the quarter, waxing appliances in the Chinese market stores have reached 171.
However, the US retail giants in the Chinese market is not easy.
The awkward Chinese market
On June 13, Best Buy announced that David, the Chief Financial Officer of Best Buy International, would take over as CEO of Best Buy Asia Pacific.
David joined Best Buy in 2009 and previously served as Chief Financial Officer of Yum! and has been responsible for expanding its business in China since 1996."David's global perspective, understanding of the Chinese market and his financial and operational background will enable him to take on this new role as head of Best Buy Asia Pacific. Dunn said.
But Best Buy's Asia-Pacific chief executive is not doing well. For five years, the seat was three-and-a-half.
In 2007, Best Buy set up a new Asia-Pacific president, Canadian Chinese, the former senior vice president of baozi company Yang Deming (RedmondYeung) airborne Best Buy, and the actual control of the company's business in China, in China for more than ten years of the Best Buy China veteran LV Weimin's power is overhead. However, Yang was unable to lead Best Buy China out of the woods. In October 2009, Yang grass off the field.
In March 2010, Mr. Tang, a former executive vice president of corporate strategy, took over the whip.15 months later, Best Buy's Asia Pacific chief executive has been in turmoil again. The eight-year-old, who played for Best Buy, has been linked with a move away.
Although Best Buy said that Mr. Tang is a personal reason to leave, the industry generally speculation that his departure may be associated with Best Buy in China and Asia market expansion is not strong. In February, nine of Best Buy's stores pulled out of the Chinese market after nearly eight years of stagnation.
Insiders believe that Tang's departure is not ruled out as a signal of the strategic adjustment of market development in the Asia-Pacific region. Home appliance industry experts Liu step dust believes that Best Buy since the acquisition of Five-Star appliances, expansion slowed, and the scale effect is essential for home appliance stores, Best Buy missed opportunities for development in recent years.
Mr. Dunn explained that Mr. Tang had recently developed Best Buy's strategy in Asia and in China, including increasing investment in Five-Star appliances and reinventing the Best Buy brand in Shanghai, " which will benefit both the company and its shareholders in the future, although the process is difficult."Five-Star appliances also said that the departure of Tang Sijie will not affect the development of the layout of the Five-Star appliances.
Previously, Five Star Electric President Wang Jian has claimed, 2011 year will be set up about 50 stores. However, compared with Suning, Gome (microblogging) two large electric chain giant Total nearly 2000 stores, Five-Star electric gap far.
Foreign retailing giants that have been hindered in China are not just Best Buy, but also Home Depot, the largest home furnishing retailer in the United States. It closed five stores in less than two years. In January, Home Depot closed its last store in Beijing. In March, Mattel, the largest US toy retailer, closed its first Barbie flagship store in Shanghai.
Just as Americans are licking their wounds, the world's second-largest electricity chain is making strides. On June 10, the second store opened in Tianjin, Japan, Yamada electric opened in China. In December, the company opened its first Chinese store in Shenyang, China. Industry optimists believe that, unlike the best buy individual combat, there are Japanese electronics companies in the procurement, bargaining support, Yamada motor or can go further.