Best Buy reported second quarter earnings Tuesday morning with net income down 91% to $12M, widely falling short of Wall Street estimates. Revenues were $10.55B, down 3% on the same period a year ago as bricks & mortar sales continue to decline. The news was met with a share price drop of 9% in pre-market trading for the struggling consumer electronics retailer. The company said it had reduced its annual earnings expectations, due to “lowered expectations for industry wide sales and the uncertainty associated with several key product launches expected in the second half” of the year. Best Buy also said it would not provide further forecasts for 2013, having just hired a new CEO who won’t take up his post until September. The company did allow that it expects to generate free cash flows of $1.25B to $1.5B for fiscal 2013.
On Monday, Best Buy announced the appointment of turnaround specialist Hubert Joly. Investors respnded with a 10% drop in the share price at yesterday’s close. Wedbush Securities analyst Michael Pachter wrote in a note on Monday, “We find Mr. Joly’s résumé unimpressive, and believe he lacks sufficient experience to engineer a turnaround at Best Buy,” according to DealBook. Joly, a Frenchman who was most recently at the head of travel and hospitality group Carlson, is lacking retail U.S. experience, Pachter contended. But Oppenheimer & Co analyst Brian Nagel told Bloomberg News that the move in the share price may not have been wholly attributable to lack of confidence in Joly. Rather, he said the downward spike is probably linked to the belief that if new management is being hired, chances of a buyout are smaller. The company has also been involved in a back-and-forth with founder Richard Schulze who has expressed interest in acquiring it, but who has thus far not advanced. Over the weekend Best Buy’s board said Schulze had declined a proposal to facilitate due diligence. Schulze responded that he was “shocked” by the announcement.