Best Buy Co. showed a lackluster outlook on its current quarter profits on Tuesday. The company partly blamed the loss from a recent earthquake in Japan which made some of the company’s most highly profitable products unavailable.
Chief Financial Officer Sharon McCollam also announced that she is stepping down from her position at the U.S.’s largest consumer electronics chain. McCollam played one a key role in turning the company around a few years earlier.
Long-time executive Corie Barry will be replacing McCollam after the company shareholder’s meeting which is being held on June 14. McCollam will stay on the advisory role for the rest of the fiscal year.
Best Buy’s stock fell more than 7 percent after the announcements despite first quarter profits performing better than Wall Street projections.
Chief Executive Officer Hubert Joly is trying to ease investor worries as McCollam steps down.
“Our legacy will endure,” he said.
The company is facing an uphill challenge from competitors such as online leader Amazon and big discounters like Wal-Mart, and the company is doing this by cutting costs, revamping stores and improving training of its sales staff when Joly took the lead in 2012.
The company has been offering services to speed up deliveries such as shipping goods from all of its stores and working with suppliers like Samsung in developing home theaters. Best Buy is also gearing itself towards smart home technology which is quickly piquing consumer interest especially in the idea that they are able to remotely control their homes.
Best Buy’s investments in its online business helped the company as sales rose 24 percent in the last quarter. With declining prices for electronic products compounded with less consumers buying newer models of phones, the company is facing more sluggish sales.
Joly reported that 4K TV prices have gone down 30 percent from a year ago, but at the same time assured investors that other innovations, like virtual reality goggles, can still help drive sales up.
The earthquake that hit Japan’s southern region in Kumamoto affected the supply of products including digital cameras and lenses that have high profit margins. With the low supply, the company is feeling the impact of the April earthquake.
The company is expecting adjusted earnings between 38 to 42 cents per share in the current quarter, lower than FactSet survey’s 50 cents per share according to analysts.
In the first quarter, Best Buy’s shares were at 70 cents per share earning a total of $229 million, higher than the previous year’s $129 million or 36 cents per share.
Adjusted earnings, including one-time gains and costs, were at 44 cents per share, higher than the 35 cents per share projected by analysts at Zacks Investment Research.
Revenues fell from $8.56 billion to $8.44 billion, but still beating analysts’ expectations of $8.29 billion. It is the first time the company’s revenues dropped in three years.