Best Buy soars after posting best holiday sales since 2003
BEST Buy Co. delivered a rosy outlook for the year ahead after its best holiday sales performance in more than a decade - a much-needed boost to the retailer’s turnaround plan.
The company’s shares rose in early trading Thursday after the company forecast first- quarter and full-year revenue ahead of analysts’ estimates. Same- store sales over the holiday period increased the most since 2003, fuelled by purchases of mobile phones, video- game consoles, appliances and smart-home devices.
Despite sitting squarely in Amazon’s crosshairs, Best Buy has weathered the internet giant’s encroachment better than most retailers. It helps that the consumer- electronics industry had its best holiday period in years, boosted by new gadgets like Nintendo’s Switch, while rivals such as Sears and Sam’s Club have closed stores.
“We believe Best Buy posted one of its most impressive performances in recent memory,” Anthony Chukumba, an analyst at Loop Capital Markets, said in a note. “We are also encouraged by management’s better-thanexpected 2018 guidance.”
Savings from a US tax overhaul that has slashed corporate rates could also help accelerate Best Buy’s newer initiatives to keep shoppers from defecting to Amazon. These include in-home sales advisers and same- day delivery of online orders. Best Buy boosted its long-term profit forecast because of the expected tax savings.
The shares jumped as much as seven per cent to US$ 77.50 in early trading after the release of results. The stock price was US$ 73.07 at 9.45am.
While it still must contend with Amazon, Best Buy will face less competition from brick-andmortar rivals this year. Sears, which remains a major vendor of household appliances, plans to shutter 39 locations by April, while Sam’s Club is closing 63 of its warehouse stores. Rival HHGregg Inc., meanwhile, filed for bankruptcy a year ago, crippled by bigger rivals and online merchants. With fewer options, gadget shoppers are increasingly looking to Best Buy. Visits to its stores increased three per cent in the holiday period, according to a survey from Consumer Edge Research, a rebound from the previous year’s three per cent decline.
The company said it sees fullyear revenue between US$ 41 billion and US$ 42 billion, ahead of the US$ 40.86 billion expected by analysts polled by Bloomberg. For the current quarter, samestore sales should rise between 1.5 per cent and 2.5 per cent, Best Buy said in a statement.
Not all the news was good, though. Operating profit margins narrowed in the holiday period due to compensation expenses and other investment, the company said.
Profitability concerns have weighed on the company’s mobile-phone business, and late Wednesday Best Buy said it would shutter all of its small, stand- alone mobile-phone stores by the end of May.
The retailer began to open them more than a decade ago, before Apple Inc.’s first iPhone debuted, and at one point had more than 400 locations. But dozens have closed in recent months, and the business now represents just over one per cent of total revenue.