Best Buy Co Inc (NYSE:BBY) released its second quarter results on Tuesday which beat expectations with an earnings per share of $0.69, compared to the $0.63 that was forecasted. Not only that, but the company increased its forecast for the year, now expecting revenues to grow 4% for the full year compared to earlier projections of just 2.5%. This should have all resulted in a good day for the stock, except that it didn’t, and the stock dropped 12% on Tuesday.
Normally this amount of good news would result in the stock having a great day, except that the weight of a CEO’s words, especially when it comes to a negative outlook, can carry much more weight. The company’s CEO, Hubert Joly, essentially called the quarterly results an anomaly and that they were “not the new normal.” There is plenty of pessimism and concern about online sales and that many purchases are moving to Amazon and Walmart.
The first sign that Best Buy was running into problems was likely when it started expanding into other product lines like furniture and beauty products, items that before would have been thought to have been ludicrous for the electronics retailer to carry. When a company moves away from its core products that could mean that they are not selling or that margins may not be good enough.
Best Buy has been able to co-exist in Amazon’s presence for many years but the CEO’s words do not provide investors much hope, and clearly many have jumped ship with the expectation that worse times are ahead.
