Best Buy Profits Down, Low Margin Consoles Partially to Blame
Today Best Buy reported their first quarter profits were down 18%. The drop was largely to blame on high volume but low margin items including game hardware. Here’s an excerpt from a CNN article on the drop:
The nation’s largest consumer electronics retailer also said profit was hurt by heavy sales of low-margin items such as notebook computers and gaming hardware. The company said it expects the trends to continue and lowered its full-year profit projection to take account of the forecast.
“It is still early in the year, but we do see evidence to suggest that consumer spending will be more difficult to read, particularly down to the product level,” CFO Darren Jackson said on a conference call with analysts.
“The environment indicates more potential variability in consumer spending, leading us to see a wider range of outcomes for the year. We remain confident that flat-panel TVs, notebook computers and gaming will remain very appealing to our customers,” he said. The exact mix of those sales could have an impact on the short-term gross profit rate, he added.
Circuit City will be releasing their figures later this week and it will be interesting to see not only how much their profits are down (which appears to be the case according to the Best Buy report) but also what role gaming and specifically consoles played in the drop.
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