Best Buy (BBY) reported its biggest comparable sales increase in nearly seven years on Tuesday, showing the electronics retailer’s efforts to reinvent its stores to showcase specific brands are helping it protect its turf from the likes of Amazon.com. (AMZN)
The retailer said that comparable sales rose 5.4% in its second fiscal quarter, well above the 2.2% expected by Wall Street according to Consensus Metrix, helped by demand for wearable devices, appliances and the smart home systems market it has made a big bet on. Best Buy, buoyed by a profit that also raised its full year sales and profit forecast.
What’s more, in another proof point showing Best Buy is more than holding its own against Amazon, online sales rose 31% in the quarter ended July 29.
At the same time, Best Buy executives acknowledged on a conference call that some of that gain come from the store closings of some rivals and raised concerns about their durability. Earlier this year, Hhgregg liquidated its stores, while Sears (SHLD), a major appliance seller, continued to close many stores.
CEO Hubert Joly warned analysts and investors on a conference call not to expect the sales gains to be “not the new normal.”
Best Buy shares, which had been up in premarket trading, started to decline during the conference call. Still, shares have been trading around all-time highs of late.
And for all of Best Buy’s improving fortunes, Wall Street remains jittery about any sign Amazon could again be stealing market share from Best Buy as it had a few years ago: in July, when news of Amazon’s plan for a Geek Squad-like service, Best Buy shares briefly tanked.
CEO Hubert Joly and his team have earned praise for transforming Best Buy in recent years, even as the likes of Amazon.com, Target and Walmart have gone aggressively for the electronics market by slashing costs. The company has revamped stores with areas for vendors like Apple and growing categories like home theatre. Best Buy is now fully in a new phase of its turnaround, called ‘Building the New Blue’, to focus more on things like e-commerce.
And that strategy continues to earn praise from industry analysts.
“There are large groups of customers who feel more confident buying online from Best Buy than other e-commerce only merchants, mainly because Best Buy has stores where they can seek advice, resolve problems, and return items if needed,” Neil Saunders, managing director of GlobalData Retail, wrote in a note on Tuesday.
Best Buy said it now expects full-year revenue growth of 4%, up from 2.5% previously, and projects operating income will increase 4% to 9%, with the improved outlook the results of “continued positive industry and consumer momentum, coupled with the impact of product launches,” according to CFO Corie Barry.