Editor's note: This story has been updated to include additional information about non-GAAP earnings and the impact of the new tax law.
Best Buy on Thursday said that fourth quarter revenue rose 14% year over year to $15.36 billion, beating the FactSet consensus estimate of $14.51 billion cited by Marketwatch. The holidays helped stoke a 9% same-store sales increase, handily besting FactSet's consensus forecast for 2.9%. Removing an extra week of sales in the quarter, same-store sales rose a still-robust 8%, the company said.
The company saw same-store sales growth across most of its categories, with mobile phones, gaming, appliances, smart home, wearables and home theater the largest drivers, according to a company press release. U.S. e-commerce sales in the quarter rose 17.9% to $2.8 billion, thanks to higher conversion rates and higher average order values that accounted for 20% of sales, the company said.
On Wednesday, Best Buy announced the closure of all 257 U.S. Best Buy Mobile stand-alone stores by May 31, due to "changing economics in the mobile industry." Those sales will be integrated into the company's flagship stores and website, "which are today more economically compelling," the company said in a filing with the Securities and Exchange Commission. The retailer anticipates as much as $65 million in pretax charges from the closures, mostly from store lease terminations.
Best Buy got its merchandise mix right during the holiday quarter, and the iPhone X's late release, which hurt sales in the third quarter, helped boost them in Q4.
The healthy U.S. housing market and the decline of Sears also helped drive appliance sales, and Sears' travails will continue to be a benefit in the medium term, according to GlobalData Retail Managing Director Neil Saunders.
But the bottom line is shakier, as operating income declined 1% and net income fell 40%, thanks to staff compensation, investments, a less profitable product mix and high tax expense from the tax reform law. The negative impact of the new tax law was about $1.17 in diluted earnings per share; otherwise, non-GAAP diluted earnings from continuing operations in the quarter rose 25% to $2.42 per share, beating FactSet’s consensus of $2.04 per share.
The retailer said it expects same-store sales for the year to be flat or rise as much as 2%. Some consumers benefiting from the new tax law are going to spend their bonus on new electronics, which will help, Saunders said in comments emailed to Retail Dive.
Taken together, the retailer has executed a stellar turnaround that has effectively countered Amazon's market share gains in a way that other electronics retailers have failed to do. Key to Best Buy's proposition is its in-store and at-home customer service, experts have told Retail Dive. "Fortunately for Best Buy, many of these items need explanation and demonstration, particularly among the less tech-savvy," Saunders agreed. "This helped make its stores the first port of call for many shoppers."
Moody's Investors Service Lead Retail Analyst Charlie O'Shea concurs, saying in comments emailed to Retail Dive Thursday that the retailer's Q4 sales "reinforces our view that consumers still value the store experience."
"Best Buy's $15-plus billion in revenue for Q4 is a level not seen since the divestiture of Europe during 2011," he also said. "On the online front, Best Buy has eclipsed the 20% of total sales threshold, which is a clear indication of multi-channel strength."
The closure of so many mobile stores, which the company said it first began opening 12 years ago, will take a bite out of its results. But it's a wise move nonetheless, according to Moody's and GlobalData.
"As much as this format once allowed Best Buy to tap into a very fast-growing category, cell phone sales growth is now far less impressive," Saunders said. "Ultimately this means that the economics of the stores no longer stack up. With technology becoming more integrated, we also believe that the rationale for a stand-alone mobile store has faded."
Because 85% of Best Buy's mobile stores are within three miles of one of its flagship big boxes, GlobalData analysts anticipate a small reduction in the number of customers to be "more than offset" by cost reduction.