Best Buy (BBY) showed that its stellar holiday season was no fluke on Thursday, reporting a huge jump in sales helped by its efforts to give shoppers more reason to come to its stores.
The electronics retailer said that U.S. Comparable sales rose 7.1% in the first quarter, following a big jump during the Christmas season, showing that Best Buy’s strategy to leverage its stores to showcase technology people want to try and learn about in person rather than online only, and the expertise of its workers, is helping it hold its own against Amazon. Wall Street analysts had expected a 2.9% jump, according to Consensus Metrix.
Still, there were some blemishes in Best Buy’s first-quarter report that sent shares down 7%. For one thing, Best Buy’s online sales growth was 12.1%, enviable for most retailers, but modest compared to its year-earlier results. What’s more, despite the strong quarter, Best Buy did not update its annual financial forecasts, suggesting it expects certain costs to pinch profits for the rest of the year. Fellow Minneapolis-area retailer Target (TGT) got a similar reaction earlier this week when its results suggested its investments to beef up e-commerce, while working, were proving to be a bit pricey for investors’ tastes.
Yet Best Buy may be a victim of its own success, with strong results in recent quarters sending shares way up and therefore setting them up to take a hit at any sign of disappointment.
But it’s clear that Best Buy, which only a few years ago was presumed destined to retail obsolescence, is keeping its foot on the pedal to keep its stores and services relevant. For instance, Best Buy recently launched a Total Support Tech membership service that for $199 a year, gives customers all the help they need tech-wise with anything they bought, at Best Buy or otherwise. Best Buy continues to make a big push in smart homes and has begun to wade into the world of health care, with tech services for older Americans. Best Buy also has a newish complement of in-home advisers that make house calls and provide advice on things like installation. This is a far cry from the Best Buy selling CDs, DVDs and run-of-the-mill electronics of just a few years ago.
Best Buy is also proving to be very pragmatic about Amazon, its one-time would-be killer. Best Buy sells a number of Amazon products and last month announced it would be the exclusive seller of new smart TVs with Amazon’s Fire TV and Alexa voice assistant built in. In the Minneapolis Star-Tribune, Amazon CEO Jeff Bezos heaped lavish praise on his Best Buy counterpart Hubert Joly and called Best Buy’s comeback “remarkable.”
“We’ve focused on expanding what we sell and evolving how we sell,” Joly said on a conference call.