Best Buy gets a big bite out of Apple in Q1
Demand for iPhone 6, big TVs and appliances surged at Best Buy in the first quarter, enabling the company to report a much-better-than expected same store sales increase.
The company reported same store sales in the quarter ended May 2 were up 0.6%, easily beating Wall Street forecasts for a 0.4% decline and helping it post a stronger than expected profit of $129 million, or 36 cents a share, down 72% compared to a year-ago profit of $461 million, or $1.31 a share. The company said the quarter included $178 million in restructuring charges and $38 million in tax-related expenses. Revenue dropped 1% lower to $8.56 billion but still beat expectations for $8.46 billion.
“Enterprise revenue of $8.6 billion, in addition to our non-GAAP operating income rate and non-GAAP diluted EPS, all exceeded our expectations during the quarter due to a stronger-than-expected performance in the Domestic business,” said Hubert Joly, Best Buy president and CEO. “In the Domestic business, against a backdrop where the NPD-reported consumer electronics categories, which represent approximately 65% of our revenue, were down 5.3%, our comparable sales, excluding the impact of installment billing, declined only 0.7% as we continued to take advantage of strong product cycles in large screen televisions and iconic mobile phones and continued growth in the major appliance category.”
Those iconic mobile phones would of course largely be the iPhone 6, launched last winter, as well as Samsung’s Galaxy 6.
“Throughout the quarter, our strategy of delivering ‘Advice, Service and Convenience at Competitive Prices’ continued to resonate with our customers. While merchandising, marketing and operational execution were the tactical drivers of our better-than-expected first quarter financial results, strategically, we believe the cumulative impact of the progress we have made to improve our multi-channel customer experience is what has allowed us to consistently outperform the market. We have made real progress and it is showing up in our results. I therefore want to thank our teams across all functions for delivering this progress and these results. Let me be clear though, all of us know that we have significant opportunities and work ahead of us.”
Best Buy said closing half of its Future Shop stores in Canada and converting the rest into Best Buys has cost $191 million so far, and could cost another $90 million down the line. In March, Best Buy closed 66 Future Shop stores and converted another 65 into Best Buy locations in a bold move to shake up its operations in a tough retail environment. Shortly after, the company rejigged its online offerings and announced a plan to start selling goods from other stores on its website.
Joly concluded: “While the Consumer Electronics industry is subject to product cycles, we are excited about the role that technology plays in people’s lives and the opportunities that this creates. We are also confident that we are executing against the right investment strategy that will allow us to capitalize on key technology waves and customer-experience opportunities to build sustainable long-term shareholder value.”
Best Buy operates more than 1,000 stores worldwide.