Best Buy is winning again
Recent turmoil in the stock market hasn’t dimmed Best Buy’s outlook for the third quarter while the release of better than expected second quarter results has validated the company’s strategy, according to CEO Hubert Joly.
Strength in categories such as major appliances, large screen televisions and mobile phones, offset by weak tablet sales, helped Best Buy achieve a 2.7% domestic same store sales increase and pushed revenues up 3.9% to $7.9 billion during the second quarter ended August 1. Online comparable sales increased 17%.
“We believe these better-than-expected second quarter results are affirmation that our strategy of offering advice, service and convenience at competitive prices is paying off,” said Best Buy Chairman and CEO Hubert Joly.
Net income from continuing operations increased 19.7% to $164 million, or 49 cents a share, from $137 million, or 42 cents a share.
“As we look forward, while we are cognizant of the recent financial market turbulence, we believe the combination of an opportunity-rich environment and the strength of our competitive advantages leads us to have a positive outlook about our future prospects, starting with the important back-to-school third quarter.” Joly said.
The turbulence to which Joly referred was the plunging price of major stock market averages in the days preceding the release of the company’s results on August 25. As a purveyor of big ticket, high consideration purchases, Best Buy in theory tends to benefit from the so-called wealth effect caused by increasing equity prices. Conversely, the company isn’t modifying its third quarter view even though it could be argued that further market declines and the resulting angst could cause some consumers to postpone big ticket spending.
“It is difficult to know, though, if the recent volatility in the financial markets will affect overall consumer spending,” said Sharon McCollam, Best Buy’s CFO. “To date, however, we have not seen a measurable impact versus our original expectations. As such, our outlook assumes there will be no material changes in consumer spending in the third quarter.”