Best Buy Stock Slips After Missing Q2 Revenue Estimates, Ongoing China Tariff Concerns

Best Buy shares Aug. 29 fell as much as 9% in early-morning trading after the nation’s largest consumer electronics retailer revised downward fiscal year revenue estimates — largely due to ongoing tariff concerns with China.

Best Buy, like most CE retailers and manufacturers, relies in large part on Chinese-made products, including its line of Insignia TVs.

“This updated guidance factors in our best estimate of the impact of recent announcements regarding tariffs on goods from China … and general uncertainty related to overall customer buying behavior in the back half of the year,” CFO Matt Bilunas said in a statement.

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Meanwhile, entertainment same-store sales dropped 13.7% compared to a 8.5% increase  a year ago. The business unit includes DVD/Blu-ray Disc movies, video game hardware and software, books, music CDs and computer software.

International entertainment same-store sales dropped more than 20%.

Domestic entertainment revenue topped $441 million from $608 million during the previous-year period. The segment represented 5% of Best Buy’s domestic revenue compared to 7% last year.

Best Buy closed 13 large format stores in the period. Restructuring charges of $48 million primarily related to changes in the company’s domestic retail operating model. In the prior year, restructuring charges of $17 million relate to the closure of the company’s domestic Best Buy Mobile stores.

Regardless, new CEO Corie Barry said overall Q2 revenue grew 1.6% on top of a very strong 6.2% last year.

“We also delivered improved profitability driven by gross profit rate expansion and continued disciplined expense management, demonstrating the culture we have built around driving cost reductions and efficiencies to help fund investments,” Barry said in a statement.

Best Buy Closing All Domestic Mobile Stores

Best Buy reportedly is shuttering all 250 branded mobile stores in the United States, effective May 31.

The closures do not affect 52 mobile stores operating in Canada, according to Reuters, which cited an internal memo sent to affected employees by CEO Hubert Joly.

In 2015, Best Buy shuttered all 131 Future Shop stores in Canada, converting 65 to Best Buy Mobile outlets.

The consumer electronics chain opened the smaller (1,400 square-foot) mall-based mobile stores in 2006, focusing on mobile phones and other portable media devices compared to general CE and household appliances at larger (40,000 square feet) big box stores.

With smartphones sales stagnating worldwide, Best Buy saw mobile store operating costs exceed revenue. The stores, which represent about 1% of Best Buy total sales, are about three miles from a standalone Best Buy – a reality Joly believes won’t negatively affect consumers.

“We feel good about the opportunity to retain customers and transition them to another one of our sales channels,” Joly told staff, adding the company would assist affected employees with severance and job opportunities in other Best Buy stores.

Best Buy reports fourth-quarter (ended Dec. 31, 2017) financial results March 1.