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Best Buy Profits Surge in Fourth Quarter of 2014

Best Buy Profits Surge in Fourth Quarter of 2014

Best Buy (BBY), the large electronics retailer, saw fourth quarter 2014 profits rise by a whopping 77% which beat Wall Street predictions that were predicted for the company. Earnings for the quarter amounted to $519 million which translates into earnings of $1.48 per share, far above the predicted $1.35 per share earnings.  These numbers were fueled by high sales in areas such as cell phones and large screened televisions.   Just one year ago, the retailer posted fourth quarter earnings of $293 million  or 85 cents per share.

Along with higher than expected profits, the company also announced plans to reduce spending by as much as $400 million dollars over a three year period.  Best Buy CEO Hubert Joly discussed the program known as ‘Phase Two’ in a call with investors and analysts on Tuesday.  Joly also noted that the cost cutting initiative would not result in loss of jobs for employees.  Joly also told analysts that the company will be increasing investments in capital expenditures.  Figures announced detailed a jump from the current budget amount of $550 million and the 2015 budget of $650 million.  “To win, investing now is imperative,” Joly told investors during the conference call.  The money will be used to improve retail Best Buy locations as well as  for marketing and online growth.

Key to the success of Best Buy after the PC market dried up was creating a store within a store approach.  Walking into many retail locations, the Best Buy store will have several areas dedicated to manufacturers such as Samsung and Microsoft which are dedicated to the products from these companies. Often, these areas are visually attractive and massive in size compared to other similar products being sold which has increased sales for these types of products. In addition, Best Buy has zeroed in on appliance sales adding more inventory and choices at retail stores as these purchases are most often done there rather than online.

Best Buy’s stock price has doubled under CEO Joly  who is credited with the massive turnaround.  At one point stock was at a low of $11 per share in 2012  but has gone upwards to a high of $39 share.


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