Best Buy has a pleasant Q4; now, about that customer service...

The fourth quarter was a better period than expected for electronics retailer Best Buy, which on Thursday reported net earnings of $570 million -- down 23% year-over-year, but above expectations and mid-quarter guidance, and sufficient to precipitate an EPS of $1.35.

Seriously, in this economy? According to the company, store sales were indeed down by nearly 5%. But that was offset by revenue gains from new store openings (seriously, in this economy?) and an improvement in the gross profit rate. And, said outgoing CEO Brad Anderson, the quarter finished stronger than it began -- so much so that previously enacted inventory reductions came back to bite them, as eager customers found inventory shortages on wanted products.

(Pause. Your writer would like to interject another note into these proceedings, stating that on Consumerist's currently running Worst Company In America 2009 competition, Best Buy is a strongly seeded #8 and neatly trouncing T-Mobile right now for the (dis)honor of being anointed the nastiest business in the US. And we're talking about a bracket that pits the likes of AIG and Peanut Corporation of America -- before the quarterfinals.)

The company reported a jump in its domestic market share, up 1.2% to almost 22%, thanks to new store openings, the demise of competitors such as Circuit City, and sales of high-ticket items such as notebooks and flat-panel televisions.

Incoming CEO and current COO Brian Dunn credited much of the uptick to in-store employees, who are sticking around in droves: "Despite the tumultuous times, our employee retention metrics have been incredible," improving to 44% turnover from nearly 70% two years ago. (Your reporter's confused: Are there a lot of people out there responding to the tight job market by quitting the job they have?) "An engaged, experienced employee," said Dunn, "is more likely to create a great customer experience."

Dunn also waxed poetic about the gains in customer share, saying the rise "represents millions of individuals with names and families and dreams that we now have the opportunity to engage with and support." He also stated that customer satisfaction scores were up 150 basis points over last year, spotlighting in particular improvements at Best Buy Mobile, which even he admitted has been compared by customers to going to the dentist.

(Did we mention that the company's on the cusp of a class-action lawsuit in New York for not only fudging their "price match" policy, but is documented to have awarded bonuses to employees who ignored or derailed claims? Internal Best Buy documents guide employees in ways to avoid honoring the offer; the stores under scrutiny denied over 100 requests each week.)

Dunn is not oblivious to Best Buy's reputation, but where he goes he sees improvement. On the call he told a charming story about an unannounced visit he made to the Best Buy in Pflugerville, Texas (northeast of Austin -- it's where they film Friday Night Lights, for all you TV fans) where the shelves looked great, the employees were friendly and knowledgeable, and the manager has turned down repeated transfer offers to stick with the store and the city he knows best. Likewise, he acknowledged that the death of Circuit City provides, "candidly, another crack at getting back customers we have disappointed along the way, who've left the brand over time."

Brad Anderson, who's leaving the CEO spot after seven years, gave a spirited long-view overview of the company's position, touching on such disparate topics as Windows 7 (which is impressing him), whether or not there was anything new at this year's CES (there always is, but it's not always obvious), the perils of commoditization, how Best Buy aims to succeed at internationalizing where so many other tech businesses have failed, and the benefits of the company doing its own sourcing and, increasingly, its own manufacturing.

The Q4 gross profit rate was 24.6%, up year-over-year from 23.7%. Some of that is based on Best Buy Europe, which sells a lot of high-end mobile phones, and some is creditable to stronger sales in home theater and computing gear. That doesn't include notebooks, which are actually a low-margin proposition for Best Buy. CFO Jim Muehlbauer noted that the company met many of the goals it set for itself on the Q4 2008 call a year ago, including those concerned with customer service, outlay, and growth.

For the fiscal year just ended on February 27, GAAP earnings per share worked out to $2.39, down from $3.12 for fiscal year 2008. The company offered a bit of guidance on that front, predicting for FY 2010 an EPS range of $2.50 - $2.90. The company expects, as Muehlbauer put, it, "a year of volatility," with per-store sales declines ameliorating in the latter half of the year.