May 24, 2016 / 4:18 PM / 2 years ago

Best Buy forecasts profit below estimates, shares plunge

(Reuters) - Best Buy Co Inc’s earnings beat expectations on Tuesday and the company registered strong online sales growth, but a lower-than-expected outlook for current-quarter profit sent its shares down more than 7 percent in early trade.

The electronics retailer said second-quarter profit will be impacted partly due to a supply disruption for some high-margin products after an earthquake in Japan and due to investments in services launched last September. The earthquake also hit production at companies like Sony Corp

Chief Executive Hubert Joly said he expects the supply disruption from Japan to be limited and a rebound in demand when supply resumes. “It is likely that the impact is only temporary,” he said.

The earthquake has impacted supply of digital imaging products like cameras and camcorders.

Best Buy also said Chief Financial Officer Sharon McCollam will step down on June 14 and remain in an advisory role until January 28, 2017. McCollam joined Best Buy out of retirement in 2012 to help steer the company in the face of intense online competition.

She will be replaced by Corie Barry, who currently serves as the chief strategy officer and has been groomed by McCollam as a successor.

Best Buy forecast adjusted profit of 38 to 42 cents per share for the second quarter. Analysts on average expected 50 cents per share.

The outside of a Best Buy store is seen in Westbury, New York, U.S., May 23, 2016. REUTERS/Shannon Stapleton

The company reaffirmed its full-year outlook, which includes approximately flat revenue and operating income, with earnings per share growth driven by share repurchases.

Joly said the company is not revising its outlook as the first quarter represents less than 15 percent of full-year earnings and the company does not have new material information as it relates to product launches throughout the year.

Best Buy’s total comparable sales fell 0.1 percent in the first quarter, excluding the impact of installment billing plans. Analysts on average expected a decline of 1.2 percent, according to research firm Consensus Metrix.

The net income attributable to shareholders rose 18 percent to $229 million, or 70 cents per share.

Excluding items, the company earned 44 cents per share.

Revenue fell 1.3 percent to $8.44 billion, hurt by weaker demand for mobile phones and tablets.

Analysts expected earnings per share of 35 cents and revenue of $8.29 billion, according to Thomson Reuters I/B/E/S.

The company’s online business grew 24 percent in the quarter, ahead of many retail peers, helped by better services including faster shipping.

Reporting by Nandita Bose in Chicago and Abhijith Ganapavaram in Bengaluru; Editing by Kirti Pandey and Meredith Mazzilli

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