Best Buy in Financial Recovery, JC Penny and Walmart Hurting

English: Logo of Best Buy, US-based retail chain

Best Buy has reported better-than-expected earnings amid a difficult retail environment that has hurt other US chains JC Penney and Barnes & Noble.

“In November at our investor meeting, we talked about the two problems we had to solve: declining comparable store sales and declining operating margins,” Mr Joly said, in a statement accompanying the earnings.

Although sales at its US stores shrunk by 0.4% in the second quarter, the numbers were nonetheless better than many analysts had been expecting and included one-time factors like changes to store layouts.

Struggling department store chain JC Penney reported a loss of $586m and said sales had declined by 12% from the same period last year.

Mr Johnson’s efforts to do away with discounts and overhaul inventory led to a $1bn loss in his first year as JC Penney’s boss.

Hedge fund titan William Ackman resigned from the board of JC Penney last week, after a tumultuous few months in which he had sought to have Mr Ullman removed and yet another new boss installed.

In a separate filing, chairman of Barnes & Noble’s board Leonard Riggio said he was putting on hold his stated efforts to buy the retailer’s consumer book stores.

“While I reserve the right to pursue an offer in the future, I believe it is in the company’s best interests to focus on the business at hand,” said Mr Riggio in a filing with US regulators.

Overall, the retail environment in the US is not expected to improve, and other retailers have warned about a weaker-than-expected back-to-school sales shopping period.

The world’s largest retailer Wal-Mart reported weak sales last week and said it expected demand to remain low for the rest of the year.

Despite this, many observers expect that central bankers at the US Federal Reserve will announce at the end of their two-day September meeting plans to begin to wind down a period of extraordinary monetary easing meant to prop up the fledgling US recovery.


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“Showrooming” Killing Retail Stores? Best Buy, Pet Smart and Others Should be Worried

Best Buy sign

First, we saw Target discontinue the sales of the Amazon Kindle due to people “Showrooming.” That’s where people go into the store to check out a product, and then go online and buy it from someone else.

Other retailers have been trying to solve the problem, one even going so far as to charge people who are “just looking” $5.

Best Buy thinks they’ve got a solution to the problem: Match almost everyone’s price.

Good idea short-term, but it won’t work.  Unless Best Buy is able to provide a great service people want, Best Buy just won’t be able to grow their sales.  How can they possibly compete with online retailers who don’t have to pay for expensive retail space in malls, pay for expensive sales personnel/customer service reps, etc? Best Buy needs higher margins in order to stay in business. Even with their huge buying power, they just won’t be able to compete with the Amazons of the world.

Goodbye Best Buy.  I’ve really enjoyed our relationship.

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