Best Buy (NYSE:BBY) Issues Profit Warning for 2015

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By Jacob Maslow

SACRAMENTO, USA - SEPTEMBER 19: Best Buy store on September 19,Usually, annual profit warnings are a bad thing across the board. Usually, when a company says, “We won’t be making as much money this coming year,” it is a sign for stockholders to really take a long hard look at the stock and decide to either cash in on profit or dig in for the long haul. I think that neither of these situations is true for Best Buy(NYSE:BBY). You have to look behind the reason why it is issuing a negative profit call for 2015.

The main reason why Best Buy is saying that its profits might be impacted negatively for the rest of the year is due to the fact that it is consolidating its Canadian presence. Currently, Best Buy has stores called Future Shop. Under that brand, it has a decent footprint in Canada. Best Buy is planning to shut down 66 of its Future Shop stores and convert 65 of these stores to the Best Buy brand. This, of course, is going to result in job losses. We are talking about 1,000 part-time jobs and around 500 full-time jobs.

This transition and consolidation will not be cheap. It will cost the company around $200-$280 million in restructuring costs. Moreover, Best Buy is planning to spend an additional $160 million to boost its online operations. Put together, this giant electronics retailer expects its earnings to be cut by as little as $0.10-$0.20 per share in 2015. Depending on how you look at the stock, this may or may not be a good time to buy in.

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