Best Buy's New CEO Just Passed His First Major Test

best buy rainbow

Photo: By carl.lacey2 on Flickr

Best Buy reported its holiday sales numbers this morning. Global comp sales fell 1.4 per cent, though U.S. numbers were flat.And that’s not so bad.

“Our holiday selling strategy, backed by a compelling assortment, increased employee training and price match policy, allowed us to deliver these results,” said Best Buy CEO Hubert Joly. 

Right now, Best Buy’s in the early stages of a revamp under Joly, the former hospitality exec who took over the consumer electronics retailer in September. He has been working beneath the backdrop of founder Richard Schulze’s attempts to buy back the company.

Best Buy said that same-store sales rose in mobile phones, tablets, and appliances, but fell in entertainment, computers, and TVs.

Joly has passed an early test.

Best Buy’s holiday season wasn’t an absolute catastrophe.

“[It] gives the board greater bargaining power now that they’ve got the first glimmer of a turnaround,” Erik Gordon, a business and law professor at the University of Michigan, told Bloomberg. “It was not the disaster that people were fearing.”

“The company likely gained market share,” Janney analyst David Strasser wrote in a note to clients. “These results should put a long awaited floor on the stock and give potential buyers incremental confidence in the structural strengths.”

Not everyone’s so optimistic.

“There are no redeeming qualities to the quarter from Best Buy,” wrote Brian Sozzi, chief equities analyst at NBG Productions, in a note. “In my view, it finds itself in quite the pickle.  A clearly deteriorating business that could be left to die on public markets… seeing as the founder may be concerned by the pace of deterioration and vanish from the picture.” 

Sozzi’s especially worried about one number in particular.

Best Buy lowered its free cash flow guidance to $500 million from November’s range of $850 million-$1.05 billion.

“While we believe the holiday sales indicate the new senior management team has begun to stabilise the business, we are troubled by the reduced free cash flow guidance,” BB&T analyst Anthony Chukumba told MarketWatch.

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