Best Buy stock drops after bad earnings report

Categories: Business
best buy shanghai.jpg
Best Buy still has people who show up to buy stuff... in China.
Best Buy, the Richfield-based tech retailer that's become the largest outlet for fancy gadgets in America, looks to be in trouble. Yesterday, the company reported a 30 percent drop in second-quarter profits. Once the market got a look at that report, Best Buy's stock became one of the worst buys on Wall Street.

Amidst an otherwise even-keel day in the stock market, Best Buy stock dropped 6.5 percent yesterday, and  thanks to pre-market trading will start out down another 1 percent today.

Best Buy bragged up its increase in tablet and smart phone sales over last year's numbers. But analysts say the handwriting is on the (Facebook) wall: People want to buy their gadgets online, not in a big-box store.

Indeed, among the bright news Best Buy touted in its quarterly earnings report was that its own online revenue went up 13 percent. That's great news if you run a website. Not so great if you build stores the size of the Roman Colosseum and fill them with bright lights and employees.

IPhone_4_in_hand.jpg
Wikipedia
Best Buy sold more iPhones -- but no one wants to buy them in person.
According to the Wall Street Journal, Best Buy has plans to cut the total amount of square footage it leases by 10 percent in the next five years. Presumably this would be accomplished by closing stores, not by just roping off certain parts of stores. But in an interview with analysts, CEO Brian Dunn pushed back on shareholders' demands that the company close more stores, and faster.

Among the evidence Dunn cites to keep the lights on is the fact that 40 percent of Best Buy's online purchases are picked up at one of its 1,100 stores nationwide. Right, so, because Americans are too lazy to actually shop in person, but too cheap to pay for shipping, the company needs 1,100 bright blue boxes with higher ceilings than the Sistine Chapel.

"There are still," Dunn told the analysts, "things in the physical world that are going to be important: expert advice and the ability to see and touch the latest tablets."

The analysts seem to disagree, arguing that people just don't care to leave home to shop anymore.

It's worth pointing out that the company didn't actually lose money -- only that profits and revenue stayed nearly identical from last year, while expenses ticked up, giving investors slightly less return on their shares than they got last year. That makes them mad, though rather than confront Brian Dunn in person, they'd rather just send him angry e-mails and tweets.

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