Best Buy CEO: 'Our Spending Rose To Unsustainable Level' (BBY F3Q06 -- Qtr Ending Nov 26, 2005 -- Conf Call Quotes)

Best Buy (BBY) is down 12% today after reporting F3Q06 earnings -- profit declined 6.8% y/y, as sharply higher sales/administrative expenses outran a 10% increase in revenue. We'll have a transcript of the full conference call up soon, but in the meanwhile, here's an excerpt -- Best Buy CEO Brad Anderson on what went wrong in internal expenses:

we made a tremendous number of investments in our… capabilities. Some of these investments are paying off, such as our sourcing, supply chain, and IT work, yet others did not perform as expected during the quarter, such as our Canadian expansion and our organic growth drivers which include new store openings, converted stores and services. As a result our SG&A spending was higher than we expected. Frankly, our spending rose to what we feel is an unsustainable level. This is a risk we accepted when we embarked on this journey at such a rapid pace…

As we transform our stores, the primary investment in change is in the labor model and at all of our stores we've been adding specialized positions. These include Geek Squad agents, home theater installers. At our segmented stores, on top of that we've been adding business pros and personal shopping assistants and other positions. These specialized positions came in addition to our existing labor model, and if the truth be told we have not optimized what was already available in our stores…

(Quotes are from the CCBN StreetEvents transcript.)

BBY 1-yr chart: