Best Buy shines as Q1 sales jump

 

Best Buy ran strong out of the gate in its first quarter, particularly in its brick-and-mortar channel, as the company’s turnaround continues to impress.

“Today's robust results from Best Buy serve as a reminder that with focus and effort it is possible for any retailer to succeed against Amazon and other online players,” commented Neil Saunders, managing director, GlobalData Retail. “We believe that the actions Best Buy has taken over the past few years and the changes it continues to make, have put it in a strong competitive position.”

He also added a few caveats, including that Best Buy was up against soft prior-year comparisons, and that his firm’s data shows that around 38% of consumers who received some benefit from the tax changes spent at least some of the windfall on technology.

“From the second quarter onward, Best Buy starts to lap much tougher prior year numbers,” Saunders said. He also noted that, “…while the tax benefits will remain for some time, they will likely become less pronounced as the year progresses - especially so now that gas prices are on the rise.”

Best Buy has focused on improving its web site functionality, customer service and delivery times, rolling out same-day delivery to more markets. It is launching a subscription-service called “Total Tech Support” with an annual fee of $199.00 that provides members with unlimited Geek Squad in-store, phone, and online support for their technology and appliances.

Best Buy's net income rose to $208 million, or 72 cents per share, in the quarter ended May 5, from $188 million, or 60 cents per share, in the year-ago period. Excluding items, earnings were 82 cents per share. Analysts had estimated earnings per share of 74 cents.

Revenue rose to $9.10 billion, beating estimates of $8.74 billion, beating Street estimates of $8.74 billion. Same-store sales rose 7.1%, much higher than analysts had expected.

In a positive quarter, the only down note was online, where the chain’s domestic same-store sales growth came in at 12%, down from 22.5% growth last year.

In a statement, Hubert Joly, Best Buy chairman and CEO Hubert Joly noted that the chain’s performance was broad-based, with positive comparable sales across all channels, geographies and most of its product categories.

“The top-line strength is the result of continued healthy consumer confidence, product innovation in multiple areas of technology, and our unique value proposition resonating with customers,”Joly said. “We are focused on providing services and solutions that solve real customer needs, and on building deeper customer relationships. We are investing in technology, people and supply chain in support of our strategy.”

Despite its better-than-expected results, Best Buy did update its forecast.

“Our Q2 guidance reflects our expectations for continued momentum in the business as well as lapping strong comparable sales last year,” said CFO Corie Barry. “Because it is early in the year, we are not yet updating our previously provided full-year outlook.”