Despite headwinds, Best Buy sales grow with boost from mobile, games and appliances
- Best Buy reported a 1.6% increase in first quarter sales with total Q1 revenue reaching $8.5 billion. Total comparable sales increased by 1.6% company-wide and by 1.4% in the U.S. Best Buy’s online comparable sales in the U.S. rose 22.5% in the quarter. After executives raised their guidance for the year and beat analyst projections for the quarter, Best Buy stock enjoyed a 14% bump in pre-market trading.
- Diluted earnings per share came to 60 cents for the big-box electronics retailer, down from 69 cents in the same period last year. Once adjusted to exclude one-time proceeds from a legal settlement in the year-ago quarter, Q1 earnings at 60 cents per share rose nearly 40% from 43 cents per share last year. Best Buy surged past analyst expectations of 40 cents per share, according to MarketWatch data. Management also raised their guidance for the year and now expects operating income to grow by between 3.5% to 8.5%, as compared to 1% to 3% growth that was previously expected.
- On a conference call with analysts, CEO and Chairman Hubert Joly said the company has finished cutting $400 million in costs in recent years and is now looking to cut another $600 million in costs in the coming years, according to the Minneapolis StarTribune.
Best Buy executives said in Thursday’s earnings release that the retailer's profits were partly pumped up by margin increases across several categories, including appliances — a category where the company may have benefited from Sears’ recent struggles. Joly credited sales increases to better-than-expected performance in the company’s mobile category, a “strong” performance in gaming sales and the arrival of delayed tax refund checks for consumers.
“After a relatively lackluster holiday season softened last quarter's figures, Best Buy has kicked off its new fiscal year with a much better set of numbers,” Neil Saunders, managing director of GlobalData Retail, said in comments emailed to Retail Dive. "Admittedly, a 1% uplift in companywide sales may not seem like much to get excited about, but against some challenging headwinds, we believe it is a respectable performance. That companywide comparable sales increased by a solid 1.6% underlines the fact that Best Buy held its own over the period."
But Saunders pointed out that the categories of consumer electronics, personal computing and and mobile phones “continue to be the laggards in terms of growth,” due in part to lengthening replacement cycles and the lack of “blockbuster products” to bring consumers into stores.
Best Buy has continued bolstering its competitive position in its sector, Charlie O’Shea, lead retail analyst for Moody’s, said in comments emailed to Retail Dive. Moody's expects the company to “perform at a high level across multiple categories, with appliances likely to be one of the bright spots given market dynamics.”
“Potential performance pressure points were evident during the quarter, including delays in income tax refunds and hhgregg’s bankruptcy and still-ongoing liquidation; however, Best Buy successfully avoided the trap of chasing low quality/margin sales,” O’Shea said.
The company's recent push into sales of new technologies, such as smart home devices and new gaming technologies, could open a path for future growth. Saunders said he is "encouraged by some of the steps Best Buy is taking to ensure it delivers growth."
"Foremost among these is a view that sales of newer consumer technologies, like smart home, can be stimulated with good customer service, advice, and demonstrations," he said. "From our data, we see that there is an appetite among consumers to know more about this sort of technology, and we believe Best Buy is in an ideal position to inform and engage."
Follow Ben Unglesbee on Twitter