Best Buy Third Quarter Profits Fall, Include Game Declines

Electronics chain and major U.S. game hardware/software retailer Best Buy announced higher sales but lower profit for the financial quarter ending November 26th. The poor results were ascribed to some overspending on the company's part, as well as a generally sagging holiday season for electronics, which particularly included the video game market in the run-up to the Xbox 360's launch. Revenue for the quarter was $7.33 billion, but the investments ate into the profit enough for the $138 million total to be 6.7% less than 2004's $148 million profit. One of the areas particularly affected was entertainment software, which still made up 17% of Best Buy's third-quarter revenue. However, the company revealed that game sales were down 12.2% from 2004's entertainment software revenue over the same period. Best Buy particularly commented that: "Strong customer response to the launch of the Xbox 360 console at the end of the quarter was more than offset by softness in sales of older platforms leading up to the new product launch, resulting in a comparable store sales decline for gaming in the low-double digits." "We entered this quarter with very ambitious plans for organic growth and transformation activities," said Brad Anderson, vice chairman and CEO of Best Buy. "We invested aggressively in a portfolio of initiatives. Specifically, we converted a record number of segmented stores, launched Best Buy Canada into Quebec and expanded our services business. Clearly, we over invested in certain transformation activities. As a result, our SG&A spending was unacceptably high. We are evaluating our spending to increase the yield and will edit activities that aren't delivering results."