Amid one of the nation's strongest earning seasons for retailers, leaders at Best Buy Co. Inc. managed to be both upbeat and cautious on Wednesday — sending its stock on a bumpy ride.
The company said comparable sales grew a solid 6.2 percent in the second quarter and raised its outlook for the rest of the year.
But executives cautioned that operating profit would decline as it spends more on transportation, training and technology, particularly in the third quarter.
The company now expects same-store sales on the year to rise 3.5 to 4.5 percent, compared with the previous forecast of a flat 2 percent. Earnings per share are expected to edge up to $4.95 to $5.10, an increase of 5 to 10 cents.
The forecast fell short of the exuberance Wall Street wanted in the lead-up to the crucial holiday season. Investors pushed shares down as much as 9 percent before ending the day at $77.57, off 5 percent.
Scot Ciccarelli, an analyst with RBC Capital Markets, said despite "positive attributes," the consumer electronics market is full of competitors and lacking innovation. Holiday sales account for 50 to 60 percent of earnings. And with no clear must-have product to drive sales at Best Buy, Ciccarelli remains unconvinced that it will be a blockbuster season.
"Best Buy has vastly improved its competitive positioning through price-matching Amazon [and others] and forming in-store vendor partnerships with technology leaders such as Apple, Samsung, Microsoft and Google," he said in a note. Yet even with tight cost controls, Ciccarelli said it will become increasingly difficult to drive sustained sales improvements in a deteriorating market for consumer electronics.
Chief Executive Hubert Joly urged a longer view, saying that progress "may not be linear." He pointed to five consecutive quarters of same-store-sales gains above 4 percent as one of many signs of the company's solid footing. Second quarter revenue hit $9.38 billion — showing its largest growth in 15 years for the period.