Shares of electronics retailer Best Buy surged 15% in pre-market trading Tuesday following the release of a second-quarter 2016 earnings report that handily beat expectations in several measures, with online sales rising nearly 24% for the second consecutive quarter.
Best Buy's Q2 same-store sales increased 0.8%, compared with the FactSet consensus of a 0.4% decline. Total revenue rose to $8.53 billion. Q2 adjusted earnings were 57 cents per share, a 16% increase from 49 cents per share year in the year-ago quarter, and above the FactSet consensus of 43 cents per share.
Best Buy forecasts a third quarter adjusted earnings per share of 43 cents to 47 cents, in line with the FactSet consensus of 45 cents, on revenue of $8.8 billion to $8.9 billion, a change of flat to 1% growth.
Best Buy has been keenly focused on cost-cutting in recent quarters, including closing stores; the company said Tuesday that revenues were hurt by the closure of 12 large format and 22 Best Buy Mobile stores. The electronics retailer has also suffered from the rise of Amazon’s sales in that segment, while consumers slowed their spending in the category.
But in the second quarter shoppers came in to Best Buy for home theater systems, major appliances and computing products, and smartwatches, the company said. Sales of mobile phones, a category that has seen saturation, were down, as were sales in gaming, where much purchase activity is moving toward digital streaming.
The revenue and profitability growth in the quarter surprised Best Buy itself according to Chairman and CEO Hubert Joly, who said that reining in expenses will continue to be a focus.
“Our teams delivered a strong second quarter, with better-than-expected revenue and profitability in both our domestic and international businesses,” he said in a statement. “We saw continued positive momentum in our online sales—delivering a second straight quarter of nearly 24% growth. We also continued to deliver cost savings and drive efficiencies in the business, a discipline that is critical to our ability to invest in our future.”
That future looks bright, said Charlie O’Shea, an analyst at Moody’s Investors Service. "[Best Buy's Q2 results are] evidence that a well-managed brick-and-mortar retailer with a well-thought-out strategy that successfully utilizes its physical assets can thrive as it transitions to a true multichannel retailer,” O'Shea told Bloomberg.