Best Buy (BBY) Trounces Q4 EPS View; Cost-Cutting Measures Pique Investors' Interest

Best Buy (NYSE: BBY) shares now pulling back following its fourth-quarter 2012 report which saw weaker numbers but the introduction of several cost-cutting steps aimed at returning value to shareholders.

Revenue for the quarter rose 3 percent from $16.08 billion during the same quarter last year to $16.63 billion. Non-GAAP revs were $16.73 billion, while comps fell 2.4 percent.

Best Buy swung from a gain of $50 million in the same period last year to a GAAP loss of $1.698 billion, or $4.73 per share. Excluding certain one-time items, earnings came in at $2.50 per share.

The Street was looking for revs of $17.2 billion and earnings of $2.16.

Online revs grew 21 percent in the quarter, while mobile phone domestic comps rose 20 percent.

Best Buy introduced a multi-year cost reduction program, aimed at saving about $800 million. The initiatives include:

• Planning $800 million in cost reductions by fiscal 2015; including approximately $250 million in fiscal 2013.
  
  
• The planned Domestic segment reductions include:
  • Retail stores: $300 million;
    
    
  • Corporate and support structure: $300 million; and
    
    
  • Cost of goods sold: $200 million.
• Specific actions intended to lower costs are expected to include:
  • The closure of 50 U.S. Best Buy big box stores in fiscal 2013.
    
    
  • Cost savings in corporate and support structure from IT services savings, procurement savings on non merchandise purchases, a reduction in outside consultant services and reduction of approximately 400 positions in our corporate and support areas.
    
    
  • Savings in cost of goods sold driven by reduction of product transition costs, lower product return and exchange expenses and supply chain efficiencies.
  For fiscal 2013, Best Buy is looking adjusted earnings of $3.50 to $3.80 per share on revs of $50 billion to $51 billion. The Street is modeling EPS of $3.70 and revs of $51.88 billion.
  
  Shares of Best Buy initially surged more than 4 percent, but have now pushed into negative territory. The stock last traded at $26.31.

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