Best Buy on Thursday reported first quarter domestic sales rose 6.3% to $8.41 billion, driven by comparable sales growth of 7.1% but partially offset by the loss of revenue from 17 large-format and 193 Best Buy Mobile store closures over the past year. Same-store sales grew across most categories, but especially in mobile phones, appliances, computing, tablets and smart home, according to a company press release.
Domestic online comparable sales rose 12% to $1.14 billion after rising 22.5% a year ago, thanks mostly to higher average order values and higher conversion rates. As a percentage of total domestic revenue, online revenue expanded 70 basis points to 13.6%, versus 12.9% last year, the company said.
The company's domestic gross profit rate was 23.3% versus 23.6% last year, and the decrease of some 30 basis points was driven primarily by rate pressure in mobile phones plus a prior-year legal settlement proceeds of $8 million or 10 basis points in the services category. Those were partially offset by gross profit optimization initiatives and the benefit of a $5 million legal settlement in the current year, the company said.
Best Buy is on firm footing these days despite Amazon's incursion into its electronics space, and the retailer could be benefiting as Sears continues to cede share in appliances. The company's top-line strength is also benefiting from healthy consumer confidence, CEO Hubert Joly said in a statement, as well as from "product innovation in multiple areas of technology, and our unique value proposition resonating with customers."
The importance of Best Buy's in-home services, which include product installations and computer services, can't be under-estimated, according to GlobalData Retail Managing Director Neil Saunders. "This approach is one of the reasons Best Buy has remained relevant and is firmly on the consumer radar for all sorts of technology purchases," he said in a statement. "Indeed, the 6.3% uplift in domestic sales means that Best Buy continues to grow its market share, even in a highly competitive marketplace."
The retailer's e-commerce continues to grow, with online growth in the quarter of around 14%. That's smaller than previous rates of growth, but that might not be a bad sign, as it was complemented by a 7% increase in comp store sales, according to Moody's Investors Service Lead Retail Analyst Charlie O'Shea.
"Best Buy posted another outstanding quarter, with sales results further evidencing its substantial progress towards multi-channel retail as the balance between comp store and online sales growth is very favorable," O'Shea said in comments emailed to Retail Dive, noting that revenue growth of some $500 million, despite the closure of mobile stores "is an indication that shoppers still enjoy the in-store experience. And the solid performance of appliances, which is not an online category, contributed to this in-store 'shift' as well."
But there are caveats, warned Saunders. One is that a few factors lifting this quarter's numbers, including tax cuts and last year's more muted results, are temporary boosts. Meanwhile, gas prices are rising and will challenge consumers. "Given these forward dynamics, we believe that Best Buy will need to continue evolving and adapting and must find new ways to serve the customer and drive sales," he said in an emailed statement. "From what we have heard so far, we are not disappointed."
Ongoing efficiency efforts plus consumer-facing initiatives bode well for Best Buy's ongoing relevance to the customer, he noted, calling the company's new Total Tech subscription, which boasts unlimited Geek Squad support and services for $199 annually, a smart move.