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02/25/2021

Best Buy earnings top Street but sales growth slows; cites ‘uncertainty’ as spending shifts

Marianne Wilson
Editor-in-Chief
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Best Buy Co.’s fourth-quarter earnings topped expectations but its revenue fell short as sales growth started to slow from earlier in the pandemic.  

The consumer electronics giant has benefitted from remote work and school trends and home tech upgrades during the pandemic. But it warned that the high-demand it has experienced may not last. 

"The demand for technology remains at elevated levels as we start the year," stated CFO Matt Bilunas. "However, there is a high level of uncertainty related to the impacts of the Covid-19 pandemic that makes it difficult to predict how sustainable these trends will be, including, but not limited to, the timing of administration of the vaccine and the subsequent impact to customer demand and shopping patterns, as well as potential government stimulus actions."

Best Buy’s fiscal 2022 outlook is for comparable sales growth from a drop of 2% to a gain of 1% this year, The forecast assumes “that customers resume or accelerate spend in areas that were slowed during the pandemic, such as travel and dining out, in the back half of the year,” Bilunas said.

Best Buy expects the surge in online shopping it has experienced through the pandemic to last, which has implications for the chain’s workforce and brick-and-mortar portfolio. On the company’s earnings call, Best Buy CEO Corie Barry said the company began last fiscal year with 123,000 employees and ended it with about 102,000. (Earlier this month, about 5,000 employees were laid off.) She noted that the company is committed to “reskilling and retraining” employees as it makes organizational changes geared toward e-commerce. 

“Like many retailers, we believe much of what we saw last year will be permanent,” Barry said on the call. “Our employees, and the stores will always be central to our strategy, we are simply looking at how we can best deploy our team and our physical assets to meet customer expectations and needs.”

Barry also said the chain is testing stores with a smaller sales floor and more space for fulfilling online orders. It also is considering reducing the footprint of its stores nationwide. Fewer stores in the future are another possibility. Barry said the company will sign shorter lease agreements for its stores and while the chain has closed about 20 stores during each of the past two years, the number is likely to be higher this year. 

Best Buy’s net income totaled $816.0 million, or $3.10 per share, for the quarter ended Jan. 30, up from $745.0 million, or $2.84 per share. Adjusted EPS of $3.48 easily topped analysts’ estimates of $3.45.

Revenue rose to $16.94 billion from $15.20 billion last year. Analysts had expected revenue $17.23 billion.  Total same-store sales rose 12.6% (compared to 23% in the third quarter). Computing, appliances, gaming, virtual reality and home theater products drove sales.

Best Buy’s domestic comp online sales grew 89.3% to $6.7 billion (compared with 174% in the third quarter and 242% in the second quarter) and made up 43% of the company’s total sales.

“Our stores played a pivotal role in the fulfillment of these sales, as almost two-thirds of our online revenue was either picked up in store or curbside, shipped from a store or delivered by a store employee,” stated Barry.
 
Best Buy will be giving all its hourly full-time U.S. workers a $500 “appreciation” bonus in the coming weeks. Part-time workers will receive $200. It is also providing paid time off to employees for vaccinations administration, along with providing absence time in the event they develop side effects that warrant their needing to stay home and rest after receiving the vaccination. 

"In FY22, we are accelerating investments to build on [fiscal year 2021] momentum and push even faster in our evolution to a digital-first mindset," Barry said. "This includes areas such as our technology, automation and analytic capabilities, our health initiatives, and continuing to pilot and test new operating formats with our store assets using a more flexible and cross-trained employee base."