Best Buy (BBY) posted its Q1 2012 financial figures Tuesday morning. Its Q1 2012 profit fell to $158 million from $212 million in the same quarter the year prior. However, revenue saw a slight increase to $11.61 billion from $11.37 billion in the same quarter the prior year. This could be a double-edged sword for the company. Profit slipped, but revenue topped estimates. One could interpret this to mean several things.
It could mean that Best Buy's expenses increased. This is certainly possible, since the costs of shipping rise in direct correlation with the costs of gas. Are its stores costing the company more money than it is bringing in? Keeping overhead low is always a major concern for retailers. Large spaces that must be lit, cleaned, well-stocked, and fully staffed for about 12 hours daily do not come cheap. However, this is a problem that all retailers face. Best Buy needs to show its innovation here and work to keep costs down as much as possible.
Or it could mean that its sales volume has increased, if only due to discounted pricing to compete with online retailers. Online retailers can afford to keep the prices low. They can stock their inventory in poorly lit, cheaply shelved warehouses. They do not incur the same expenses of bricks-and-mortar retailers. They can operate with fewer employees and also a lower inventory. However, the consumer still expects the pricing to be competitive when they comparison shop. This makes it difficult for Best Buy to maintain a competitive edge in this market.
Either way you look at it, even with the slight revenue jump, the numbers just do not look appealing for Best Buy. Not to mention that this electronics giant has had quite a rough go of it recently. It is struggling to hang on and keep its doors open. It has even considered looking to its mobile phone department as a main source of revenue. That's putting all of its eggs in one basket, so to speak. If Best Buy wants to maintain its market share, it needs to strategize and work hard to gain a competitive advantage and keep costs down.