Best Buy’s bad day
What happened: Best Buy’s stock dropped 28.6 percent after the company announced that sales fell during the holiday period.
What was expected: Investors were expecting a gain of 0.7 percent in comparable-store sales and online. Instead, sales fell 0.9 percent.
Best Buy CEO Hubert Joly called the results a “bump in the road.”
Richard Schulze, Best Buy’s founder and largest shareholder said: "I have complete faith in the long-term strategy, and I am confident that management is taking the steps required to win."
Background: Best Buy anticipated that it would take a hit as a result of its heavy use of promotional pricing during the holiday season. “We will be competitive on price and that will have a negative impact on our gross margins,’’ said CFO Sharon McCollam in November.
Analysts responded Thursday: “It just seems that the promotions did not drive incremental sales, that opening on Thanksgiving just added costs, and did not provide any incremental sales,” David Strasser, an analyst with Janney Capital Markets, told the Wall Street Journal.
"Their initiatives are not driving traffic," Michael Prachter, an analyst with Wedbush Securities, to Bloomberg News
Best Buy’s online sales rose 23.5 percent to $1.32 billion for the nine-week holiday period, compared with a 10 percent increase the year before.
A year ago, Best Buy’s U.S. comparable sales were down 1.7 percent.