Best Buy Rides Web to Lift Sales
May 23 2019 - 11:22AM
Dow Jones News
By Khadeeja Safdar and Aisha Al-Muslim
Best Buy Co.'s profit rose in the latest quarter as growing
online sales of appliances and electronics offset flat sales in its
stores.
The company said Thursday comparable sales increased 1.1% in the
first quarter ended May 4, slower than previous periods but the
ninth consecutive quarter of growth.
Best Buy Chief Executive Hubert Joly said the results reflect
the success of the strategy that was put in place after he joined
in 2012. "We're still in the midst of this multiyear
transformation, but we like where we are and where we're going," he
said on his final earnings call as CEO.
Mr. Joly recently announced he would step aside and hand over
the CEO job to finance chief Corie Barry in June, making her one of
the youngest CEOs of an S&P 500 company and one of the few
women. He will serve as executive chairman and sit in an office
across the hall from her to offer input on matters like strategy
and acquisitions.
Best Buy shares on Thursday fell 3% to $66.80 in early trading.
The stock was down 9% in the previous 12 months.
Results from retailers have been mixed so far this spring.
Amazon.com Inc. and Target Corp. posted strong sales in the recent
quarter, while Kohl's Corp. and J.C. Penney Co. clouded the outlook
for the sector. Many retailers are also bracing for an increase in
tariffs on goods imported from China.
Mr. Joly reassured investors about Best Buy's ability to
mitigate the impact of the tariffs and said the company plans to
press the Trump administration to limit the inclusion of consumer
products on the next list of tariffs on Chinese imports. So far
many electronics, from Apple Inc.'s smartwatches to Lenovo
computers, have been largely spared.
"While we understand the list as proposed is comprised of many
consumer items, including many electronics, we think it's premature
to speculate on the impact of further tariffs," he said.
Best Buy has undergone a striking turnaround in the past five
years, defying the fate that has befallen Circuit City, Sports
Authority, Toys "R" Us and other so-called category killers. When
Mr. Joly joined in 2012, the electronics retailer was struggling
with plunging sales and dwindling profit as consumers browsed at
bricks-and-mortar stores but made purchases on Amazon.com and other
websites.
He matched prices, added services to reduce the company's
reliance on new product releases and used its stores to fulfill
online orders. More recently, he struck a partnership with Amazon
to sell smart TVs and acquired GreatCall Inc., the maker of
senior-focused devices.
On Thursday, Mr. Joly said the company has been expanding
GreatCall and acquired a senior-focused health services company
called Critical Signal Technologies. "Our focus is to enable
seniors to live longer in their homes and help reduce their health
care cost," he said.
He also said the company expanded a program that allows shoppers
to pay for products in installments. The goal is to attract people
who might not otherwise be able to buy computers and other
big-ticket items.
In the latest quarter, growth in appliances, wearables and
tablets offset weak demand in the entertainment category. Best Buy
has been gaining share in some categories because of closures at
Sears Holdings Corp. and other retailers.
Domestic online revenue increased 15% to $1.31 billion due to
larger orders and higher traffic. The company has been investing in
its supply chain to speed up delivery times.
Total revenue was flat at $9.14 billion. Revenue from GreatCall
partially offset the loss of sales from the closure of Best Buy's
smaller mobile-phone stores and a dozen large-format stores in the
past year.
The retailer said profit in the quarter was $265 million, up
from $208 million a year ago. Adjusted earnings were $1.02 a share,
above the 86 cents a share analysts polled by Refinitiv were
looking for.
For fiscal 2020, Best Buy reaffirmed its financial outlook,
which includes the impact of the recent tariffs. The company said
it still expects comparable sales to grow 0.5% to 2.5% for the full
year. The retailer estimates adjusted per-share earnings of $5.45
to $5.65.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com and Aisha
Al-Muslim at aisha.al-muslim@wsj.com
(END) Dow Jones Newswires
May 23, 2019 11:07 ET (15:07 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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