Holidays not look so happy for Best Buy
More robust omnichannel capabilities have Best Buy CEO Hubert Joly confident about his company’s ability to execute during the holidays, but his views on overall demand for consumer electronics are another matter.
Best Buy said it expects weak demand for consumer electronics in the fourth quarter and forecast flat same store sales at domestic locations following a 0.5% third quarter comp increase that was aided by an 18% online increase. The tepid outlook came amid the release of financial results for the period ended Oct. 31, that actually exceeded analysts’ estimates. Total revenues declined to $8.8 billion from $9 billion while net income increased to $125 million, or 36 cents a share, from $107 million, or 30 cents a share. On an adjusted basis, earnings per share were 41 cents, six cents better than analysts’ consensus estimate. However it was Joly’s cautious view of the holiday season that spooked investors and prompted a sharp decline in the stock price on Nov. 19.
“We of course recognize that we are up against a strong performance in the fourth quarter of last year and that the NPD industry declines that we saw in the third quarter, both sequentially and year-over-year, may continue throughout this year’s fourth quarter,” Joly said. “We have also made incremental investments in services pricing and SG&A that are putting pressure on our fourth quarter earnings outlook. Irrespective, one thing we are certain about is our team’s ability to execute exceptionally well throughout the holiday. We are going into the holiday clear on our priorities and our plan, and with a better trained, engaged and most importantly, highly determined team.”
Among the product categories Best Buy is excited about this holiday season are ultra high definition 4K TVs, health and wearables, connected or smart devices and drones. Beyond product, Joly noted that the company’s enhanced capabilities are what will enable it to outperform the broader market where declines are expected.
For example, he singled out a new service called Blue Assist which provides the ability to call on Blue Shirt (the company’s name for employees) advice from a new mobile app and improved supply chain capabilities that will allow for faster ship-from-store. A new free service involving Geek Squad setup on top tech gifts could help improve conversion of devices.
“From a marketing perspective, we believe we are entering the quarter with a high-performing media campaign, a significantly greater social media presence and more refined personalization capabilities through our investments in our Athena database,” Joly said.