Boffo sales don’t buoy Best Buy
Even the winners can’t win in retail these days.
Shares of Best Buy tanked 12 percent, to $55.02, on Tuesday despite the big-box chain’s best quarterly sales since 2010. It notched a 5.4 percent increase in same-store sales as shoppers scooped up high-tech gadgets, TVs and appliances at its stores.
The No. 1 US electronics retailer, however, spooked investors by disclosing plans to spend more money next year on e-commerce — $700 million versus the $650 million it had previously set aside — and by cautioning that its exceptional growth is not a “new normal.”
Over the past several years, the Min- neapolis-based retailer has been one of the few success stories, executing a turnaround that allowed it to raise its revenue and income guidance for the year. Shares are up 46 percent this year.
“The bear argument on Best Buy is that Amazon is going to put them out of business,” said Loop Capital Markets analyst Anthony Chukumba. “But these guys just delivered a 5.4 percent comp in a brutal retail environment.”
Still, Best Buy has been forced to slash prices to be competitive with Amazon.
As more of its sales move online — its e-commerce sales grew 31 percent to $1.1 billion in the quarter — Best Buy is investing in a customer service program that dispatches reps to customers’ homes to advise them at no cost on home-installation projects.
The in-home advisory program will roll out to all major cities by September after an 18-month test, Best Buy Chief Executive Hubert Joly said.
To be sure, Best Buy’s 1,026 stores have been helped by the shuttering of rivals including bankrupt RadioShack and HH Gregg, and by stealing customers from Sears, say analysts.
“Our higher-than-expected comparable sales of 5.4 percent were driven by stronger consumer demand for technology products … and not to just one category,” Joly said during an analyst call. “We are gathering an increasing share of these dollars.”
Best Buy’s revenue increased 4.8 percent, to $8.94 billion, in the quarter ended July 29.