Best Buy stock jumps after 1Q sales top Wall St. views

Best Buy shopper
Shoppers moved through a Best Buy store in this file photo from November 2012 in Naples, Fla.
Spencer Platt | Getty Images 2012

Updated 1 p.m. | Posted 7 a.m.

Best Buy's stock surged in morning trading Thursday after its first-quarter sales and profit managed to top analysts' expectations.

The Richfield-based big-box electronics retailer said sales of mobile phones, big televisions and major appliances helped sales, offsetting weakness in tablets and computers.

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Overall, the company's net income declined after being pumped up a year earlier by a one-time tax structure change.

For the three months ended May 2, Best Buy earned $129 million, or 36 cents per share. That compares with $461 million, or $1.31 per share, a year earlier.

Last year's tax change helped earnings by $1.01 per share.

Excluding certain items, earnings for the current quarter were 37 cents per share. The results beat Wall Street expectations. The average estimate of 15 analysts surveyed by Zacks Investment Research was for earnings of 29 cents per share.

Under CEO Hubert Joly, who took the helm in 2012, Best Buy has been cutting costs and revamping stores to improve results as it faces competition from online retailers and discount stores. It's also been rolling out services like shipping goods from all its stores, which means speedier deliveries.

It's been working with big suppliers like Samsung to develop home theater areas for shoppers to check out. The chain has also been working with big suppliers like Samsung to develop home theater areas for shoppers to check out and recently launched a wedding registry on its website.

Revenue declined to $8.56 billion from $8.64 billion, partly hampered by foreign currency fluctuations and the loss of revenue from the consolidation of its Canadian brand. But the performance still beat the $8.52 billion in revenue that 12 analysts surveyed by Zacks expected.

Best Buy Co. announced in March that it consolidated the Future Shop and Best Buy stores and websites in Canada under the Best Buy brand. This led to the closing of 66 Future Shop stores and the conversion of 65 Future Shop stores to the Best Buy brand.

Shares of the company were up more than 5 percent in early afternoon trading.

While investors loved the news, some observers noted that Best Buy must still continue to slug it out in a highly competitive market.

"I think at the end of the day, you give this company a lot of credit for making its business model more viable in today's consumer electronics retail market, its cost-cutting and getting out of unprofitable international businesses," said R.J. Hottovy, an analyst with investment research firm Morningstar.

Hottovy, though, warned that Best Buy still faces intense competition, especially from Amazon.com

"It was a nice start to the fiscal year," Hottovy said. "But you've got Amazon, who is not going away."

MPR News reporter Martin Moylan contributed to this report.