Best Buy’s turnaround is charging ahead, as the nation’s largest consumer-electronics chain posted fiscal second-quarter results that handily beat analysts’ estimates.
Best Buy’s results are benefiting from an overall shift in consumer spending toward big ticket items in the home amid improving home values. Business is also being helped by an explosion of new gadgets like Apple Watch, which will be rolled out to all of Best Buy’s big-box stores by the end of September. The trend in spending for the home is also playing into the hands of home-improvement players like Home Depot, which also reported strong second-quarter results last week.
But Best Buy’s strong performance is also the latest evidence that it has been able to successfully navigate a tough consumer-electronics market as it wrestles with price pressures and increased competition from online stores, notably Amazon.com.
“The home focus is very meaningful, when you think about our competitive advantages,” Best Buy’s CEO Hubert Joly told The Associated Press in an interview Tuesday.
It was only a few years ago that naysayers were about to write Best Buy’s obituary, questioning how a big-box retailer could compete in a shifting landscape where shoppers are increasingly researching products at big stores and then buying online for a lower price.
Under Joly, who took the helm in 2012, Best Buy has been cutting costs, revamping stores and boosting training for its sales help. It’s also been rolling out services like shipping goods from all its stores, which means speedier deliveries. Joly told The Associated Press that most online orders are being shipped within two days, and online shoppers are getting a precise delivery date. Meanwhile, Best Buy has been improving the shopping experience at the stores.
Best Buy has also been catering to shoppers’ increasing interest in “smart home” technology – the ability to turn down the heater remotely, for example.
The company also is staking out appliances, which accounted for 10 percent of its sales mix in the latest quarter. Appliance sales surged 20.7 percent in the latest quarter. It’s highlighting appliances in specific kitchen and home areas within its stores.
It’s also fortifying its relationship with Apple. Joly told investors that demand for the Apple Watch is so strong that Best Buy will be carrying the gadget in all 1,050 of its big-box stores and about 30 of its Best Buy mobile stores by the end of September. Apple Watch went on sale in more than 100 of its stores in early August. It plans to update a total of 520 Apple shops within its stores with new fixtures by the year-end shopping season; it has already overhauled 350 of them.
For the three months ended Aug. 1, Best Buy Co. earned $164 million, or 46 cents per share. A year earlier, the Richfield, Minnesota-based company earned $146 million, or 42 cents per share.
Removing certain items, earnings were 49 cents per share.
The average estimate of 14 analysts surveyed by Zacks Investment Research was for earnings of 34 cents per share.
The consumer-electronics retailer’s revenue climbed to $8.53 billion from $8.46 billion, also surpassing Wall Street forecasts. Ten analysts surveyed by Zacks had expected $8.3 billion.
Revenue at stores open at least a year in its domestic business rose 3.8 percent, marking the fourth consecutive quarter of gains.
Strength in the domestic segment helped to offset weakness in the international unit, which was hampered by store closures in Canada, ongoing softness in the Canadian consumer-electronics industry and a stronger dollar.
Online sales rose 17 percent.
In trading Tuesday, Best Buy shares rose $3.68, or 12.6 percent, to $32.95.