Best Buy announces better-than-expected sales but also a profit drop and layoffs

Best Buy’s summer so far has been better than expected, but its profit was dinged partly because of costs from a restructuring the retailer started in the second quarter.

Best Buy recorded a $114 million charge from the restructuring, which included layoffs, though the Richfield-based electronics chain did not say how many employees were affected.

The company said the restructuring will “redirect resources for better alignment with changing customer behaviors and the company’s strategy.”

Best Buy shares closed Thursday down 3.7%.

Chief Financial Officer Matt Bilunas said on an earnings call Thursday that some “impacts” from restructuring will carry into next year.

The company did not respond to questions about which parts of the business will be affected, the exact timing or the layoffs.

Best Buy spent $8 million on restructuring costs during the same quarter last year.

Best Buy Health, a subsidiary of Best Buy, informed the state of California on July 11 that it would lay off 161 employees, effective Sept. 12.

CEO Corie Barry said Thursday that a Best Buy priority is to continue “driving efficiencies and identifying cost reductions.”

She said that sometimes the result will be exiting a business, such as the in-home health business, that is not generating the expected return.

Best Buy isn’t the only Twin Cities business to restructure and lay off workers to boost growth. General Mills and Sleep Number this year and Cargill at the end of last year also announced restructurings.

The most recent job market report from the Federal Reserve showed monthly payroll gains fell to a monthly average of 35,000 in the July-to-May period, though the unemployment rate was 4.2%.

“This unusual situation suggests that downside risks to employment are rising. And if those risks materialize, they can do so quickly.”

The release of the Nintendo Switch and other wins during May, June and July helped Best Buy record $9.4 billion in sales, a 1.6% increase compared with the second quarter last year. Barry said previously that 70% of customers selected in-store pickup for Switch orders.

She said in a news release that sales momentum has continued into August, strengthening the back-to-school results. As a result, Best Buy projected similar comparable sales growth for the third quarter.

“After a long run of poor numbers, Best Buy finally has something to celebrate with a 1.6% rise in overall revenue,” said Neil Saunders, managing director of GlobalData.

“It also posted the strongest positive comparable sales growth — also of 1.6% — in three years.

Profits fell 36% to $186 million, or 87 cents a share. Best Buy declined to raise its guidance for the year, citing potential tariff impacts on consumers and the business. In May, the company cut its full-year profit guidance to a range of $6.15 to $6.30.

“They have a pretty long track record of beating consensus expectations by a pretty wide margin,” said Anthony Chukumba, managing director at Loop Capital. “They tend to under-promise and overdeliver.

“Everyone knows they do that, so it’s expected, but still it’s better than the opposite.”

When Best Buy reported its first-quarter earnings in May, the company said it was raising prices on some items because of additional costs incurred by tariffs.

Barry declined to comment on a call with the media if prices increased during the second quarter. “These changes don’t happen in a vacuum with every other variable held constant,” she said.