Best Buy shares were down as much as 33% to $US25.32 in pre-market trading, after the retailer announced horrible holiday results.
Best Buy now expects its Q4 non-GAAP operating income to be 175 to 185 basis points lower than the 5.7% non-GAAP operating income a year ago.
Best Buy said U.S. comparable store sales were down 0.9% in the nine weeks ending January 4, 2014. But were up 0.1% internationally.
The store did however see a 23.5% jump in comparable online sales for the same period, compared with 10% a year ago.
“When we entered the holiday season, we said that price competitiveness was table stakes and an intensely promotional holiday season is what unfolded,” said Hubert Joly, Best Buy president and CEO said in a press release.
“…However, our holiday revenues were negatively impacted by a number of factors, including: (1) the aggressive promotional activity in the retail industry during the holiday period, which we believe did not result in higher industry demand and had a deflationary impact on our revenue; (2) supply constraints for key products; (3) significant store traffic declines between “Power Week” and Christmas; and (4) a disappointing mobile phone market.”
“Best Buy is out with its holiday sales update and to put it mildly, it’s on the shocking side,” said Brian Sozzi of Belus Capital Advisors. “Although the company attempted to reset Street expectations with its verbal and numerical guidance in the third quarter, the overall tone around the holidays (and post…)is unexpected.”
Multiple retailers have said competitive pricing during the holiday season weighed on profits. And many have lowered guidance and announced job cuts in recent weeks.
In that vein, Sozzi added that “this report affirms our view that Wal-Mart will issue an earnings warning in February with respect to its initial fiscal year guidance.”