Rock Bottom Prices Hurt Best Buy’s Bottom Line

Retailer Best Buy Co (NYSE:BBY) paid the price for its heavy discounting during this last holiday shopping season – its quarterly results revealed that margins have slipped substantially, hurting its earnings bottom line.

Net earnings for the third quarter came in at $154 million (42 cents a share) against previous year’s $217 million (54 cents a share). Sales rose to $12.10 billion, off analysts’ estimates of $12.14 billion.

The company faced tough competition from discount store chains such as Wal-Mart (NYSE:WMT) and Target (NYSE:TGT), and online retailer Amazon (NASDAQ:AMZN), who benefited from increased consumer propensity for Internet shopping.

The eternal trade-off between margins and volume did not quite work out in favor of Best Buy, with the heavy discounting only boosting sales by 0.3% in the reporting quarter.

Here’s how Best Buy closed on the news:

Best Buy Co. Inc. (NYSE:BBY): BBY shares recently traded at $23.73, down $4.34, or 15.46%. They have traded in a 52-week range of $21.79 to $36.33. Volume today was 31,710,848 shares versus a 3-month average volume of 6,791,400 shares. The company’s trailing P/E is 7.94, while trailing earnings are $2.99 per share. Get the most recent company news and stock data here >>

More from The Cheat Sheet