Last updated: August 20. 2013 8:36AM - 788 Views
Associated Press



In this Monday, Aug. 19, 2013 photo, shoppers walk toward the parking lot at a Best Buy store in Hialeah, Fla. On Tuesday, Aug. 20, 2013, Best Buy releases quarterly financial results. (AP Photo/Alan Diaz)
In this Monday, Aug. 19, 2013 photo, shoppers walk toward the parking lot at a Best Buy store in Hialeah, Fla. On Tuesday, Aug. 20, 2013, Best Buy releases quarterly financial results. (AP Photo/Alan Diaz)
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(AP) Best Buy's second-quarter net income rose sharply, helped by cost-cutting and legal settlements.


The struggling retailer beat Wall Street expectations and shares jumped more than 16 percent before the opening bell. The stock could hit levels not seen since 2011 if the premarket price holds.


Best Buy Co. has been cutting costs and revamping stores to offset tough competition from discounters and online retailers. Under CEO Hubert Joly, the company has instituted a price-matching policy, opened more store-in-store areas for manufacturers such as Apple and Samsung and invested more to train employees.


Best Buy through all of these measures, is trying to prevent "showrooming," when people browse in its stores only walk outside, or even stop within the store, to shop online for lower prices.


Joly said the company has made "measurable progress" since November in two key problem areas: declining revenue in stores open at least one year and declining operating margins.


The biggest specialty electronics store in the U.S. earned $266 million, or 77 cents per share, for the period ended Aug. 3. A year earlier it earned $12 million, or 4 cents per share.


Earnings were 32 cents per share excluding one-time items, much better than the 12 cents per share that analysts had been looking for, according to a poll by FactSet.


Revenue fell slightly to $9.3 billion, from $9.34 billion last year. Analyst expected $9.13 billion.


Revenue in stores open at least a year slipped 0.6 percent. That's much better than the 3.3 percent decline last year at this time.


Online sales rose 10.5 percent, a bright spot for the company, which has been working on revamping its website.


"The sales number is even more impressive considering Best Buy's entirely new website won't launch until 2014, leading me to believe that price matching, and advertising of price matching, is closing the price perception gap with Amazon," wrote Belus Capital Advisors CEO Brian Sozzi.


There will be some pressure during the second half of the fiscal year due to price cuts and marketing costs, said Chief Financial Officer Sharon McCollam, as well as a temporary increase in mobile warranty costs and changes in its private label credit-card agreement with Capital One.


However, those costs will be offset by $390 million in annual savings from cost cuts, McCollam said.


Shares rose $4.99, or 16.2 percent, to $35.72 in premarket trading. The stock has traded between $11.20 and $32.17 over the past 52 weeks.


Associated Press
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