Best Buy on Tuesday said second quarter revenue rose to $9.4 billion from $8.9 billion a year ago, as domestic revenue rose 4.4% to $8.6 billion and international revenue rose 10.8% to $740 million year over year.
Domestic comparable sales rose 6%, gaining some 150 basis points thanks to an extra week in the fiscal year but partially offset by the closure of 292 Best Buy Mobile and 17 large-format store closures over the past year, according to a company press release. Domestic e-commerce comps grew 10.1% to $1.2 billion thanks to higher conversion rates and increased traffic. Online revenue expanded 80 basis points to 14% of total domestic revenue, up from 13.2% last year.
Net earnings in the quarter rose to $244 million from $209 million in the year-ago period. Best Buy's domestic gross profit rate fell to 23.8% from 24% last year, a 20 basis point decline driven mostly by higher supply chain costs (including investments and higher transportation costs) and by the national rollout of its new Total Tech Support service. Improved product margin rates partially offset that decline, the company said.
Best Buy isn't providing guidance on its services revenue, but executives said they're pleased with how things are going when it comes to margins and sales. But for now, the retailer is focused on how those services help make its customers stickier, as it helps build relationships with them.
"The strategy is much bigger than this particular line in the revenue breakdown," CEO Hubert Joly told analysts on Tuesday morning.
That also helps offset any volatility in straight merchandise sales. In the quarter, the company said it saw comparable sales growth across multiple categories, with the largest drivers in home theater, computing, appliances, gaming, mobile phones and smart home, but also saw declines in digital imaging and tablets.
Even as it works to emphasize services, seen most starkly in its recent acquisition of health and safety solutions company GreatCall for $800 million, and sell more online, the retailer is maintaining margins in its more old-school electronics sales.
"Best Buy continued to build on its track record of excellent execution, with positive Q2 results across the board, including healthy top line expansion and comp store sales velocity, margins that are being largely-maintained despite continuing investments, and meaningful online sales growth that continues despite the 'online maturity' of many of its product categories," Moody's Lead Retail Analyst Charlie O'Shea said in comments emailed to Retail Dive. "All in all, Best Buy continues to solidify its position as one of the strongest performers in retail."
In May, the retailer launched a new marketing plan with the tagline "Let's talk about what's possible," that includes an overhaul of its logo. The retailer has swept away the old "Expert Service. Unbeatable Price" of past campaigns, including new ads that focus on "the Best Buy experience" rather than products.
Earlier, Best Buy declared its "Renew Blue" turnaround effort — focused on cost cuts, store closures, merchandise changes and improved customer service that halted its declines — "over," and in recent months has said it's now committed to growth with a series of moves in the less defensive "Best Buy 2020: Building the New Blue."