MINNEAPOLIS _ While Best Buy proclaimed it has completed its four-year Renew Blue turnaround, its lower holiday sales and outlook for flat growth for this year indicate that it its new chapter will not be smooth sailing.
The electronics retailer's shares were down 4 percent Wednesday morning after it reported fourth-quarter sales and profit estimates for the coming quarter that were below analysts' expectations.
Company executives said pressures from an "unprecedented" shortage of products during the holidays on everything from the Apple Watch 2 to the Amazon Echo and Google Home, as well as the recall last year of the Samsung Galaxy Note 7, are continuing into this quarter, depressing the retailer's first-quarter forecast that calls for a 1.5 to 2.5 percent drop in comparable sales.
Still, CEO Hubert Joly was upbeat about the health of the company, noting that the retailer has managed to stabilize its business and grow profits sustainably over the last four years. So he said it is time to move on to the next phase of the retailer's journey.
"We now feel it is time to call Renew Blue officially over and launch our strategy for the next phase of our journey _ Best Buy 2020: Building the New Blue," he said in a statement. "In this next phase, we go from turning the company around to shaping our future and creating a company customers and employees love that continues to generate a superior return for our shareholders."
The company's growth strategy will be focused on maximizing its multichannel business, expanding services and solutions, and increasing growth in Canada and Mexico.
For the coming year, Best Buy, headquartered is suburban Minneapolis, forecast flat revenue and operating income on a 52-week basis based on the assumption the company will continue to gain market share while the overall electronics industry will remain negative, as it has been the last two years.
"In essence, while Best Buy remains a stable and solid retailer, it will be treading water for the foreseeable future," Neil Saunders, managing director of GlobalData Retail, said in a statement.
In the November-to-January quarter, Best Buy said sales of connected home products, computers, headphones and TVs helped offset declines in gaming, tablets, and mobile phones.
Best Buy estimated that it also lost out on $200 million in potential sales in the fourth quarter due to the recall of the Samsung smartphone earlier in the quarter. Joly also told analysts on a conference call that the pinched supply of other in-demand products also likely meant the retailer lost out on another $100 to $200 million in possible sales.
As a result, comparable store sales in the U.S. were down 0.9 percent in the quarter and overall revenue was down slightly to $13.48 billion, lower than the $13.62 billion analysts expected.
Online sales rose 17.5 percent in the fourth quarter.
Profits rose 27 percent to $607 million, up from $479 million. Adjusted for one-time issues, the company reported earnings per share of $1.95, which was higher than the $1.67 analysts were expecting.
"Our strong bottom-line performance in the fourth quarter was driven by a disciplined promotional strategy, continued optimization of merchandise margins and strong expense management," Joly said.
Best Buy also announced Wednesday a 21 percent increase to its dividend and an accelerated share repurchase program to $3 billion over two years, up from $1 billion.
