Best Buy blamed weaker-than-expected fiscal third quarter results in part on consumer reluctance to buy more expensive 3DTVs and Internet-connected sets as well as price competition for lower-end TVs and notebook PCs.
In the U.S., quarterly revenue from Best Buy stores open at least 14 months fell 5% year-to-year compared with the company's expectations of flat or modest growth. On the poor results and a lowered outlook for the full fiscal year, Best Buy shares fell 14.8% Tuesday, down $6.18 for the day to close at $35.53.
In the TV category, "the newer technologies like 3D and IPTV... have been slower to take hold," Best Buy CEO Brian Dunn said on a conference call with analysts Tuesday.
Added Dunn, "I think there was confusion about 3D early. It was a little short on content... More and more cinematic releases are coming out in 3D. I think 3D will become top of mind as an important feature for television as we get into next year."
While Best Buy is "quite pleased" with TV sales at the high end, Dunn said, "it is an adoption in the middle which we see as a next-year sort of value proposition for the consumers in the middle around 3D and IPTV."
In addition, sales of notebook PCs and videogame titles were weaker than expected, Dunn said. Bright spots for the quarter included mobile phones and e-readers. Best Buy said it has introduced discounts for lower-end 32-inch TVs and entry-level laptops this month.
"[I]n 32-inch televisions, we did that a lot [of promotional pricing] last year around the Black Friday time period," Best Buy president of Americas Mike Vitelli said on the call. "This year, we didn't do it then. We're doing our-a lot of our 32-inch television promotions right now."
Best Buy cut its outlook for the full fiscal year 2011, now expecting earnings per share of $3.20 to $3.40, down from its prior estimate of $3.55 to $3.70.
For the quarter ended Nov. 27, Best Buy's revenue was $11.89 billion, down 1% from $12.02 billion last year, while net income was $217 million, down 4% from $227 million in the year-ago quarter.