“Significant declines” in mobile phones, tablets and digital imaging led to a nearly 1 percent dip in Best Buy's U.S. revenue over the holiday selling season, the retailer reported this morning.
Domestic revenue slipped 0.8 percent to $10.1 billion for the nine weeks ending Jan. 2, compared with a 4 percent increase last year, and comp store sales declined 1.4 percent, excluding a 0.2 percent benefit from mobile carriers’ new phone leasing plans and the loss of revenue from closed stores. Shares of Best Buy fell as much as 12 percent on news of the company's humdrum holiday.
The November/December numbers were also impacted by an ongoing decline in Geek Squad revenue, reflecting reduced pricing for services; declining extended warranty attach rates; and fewer and more minor product repairs.
Best Buy’s mobile business may have been hurt by a dearth of “must-have” models — iPhone 6s was an off-year update of the 6 — and by a plethora of affordable, fully-featured unlocked phones, available direct from vendors.
But phones aside, domestic revenue rose on strength in health and wearables, home theater and major appliances, chairman/CEO Hubert Joly said, compared to a greater-than-expected 4.8 percent industrywide decline in core tech categories as reported by the NPD Group, suggesting market share gains for Best Buy.
Online remained another bright spot, with dot-com comps up 12.6 percent on higher conversion rates, albeit down from last year’s 13.4 percent gain.
The weaker-than-expected results prompted a lowering of Best Buy’s fourth-quarter projections, which now call for a 1.5 percent decline in U.S. revenue compared to prior expectations of flat sales.
However, the company raised its operating income rate outlook — from a decline of 20 to 35 basis points to a decline of 10 to 15 basis points — due to its “disciplined promotional strategy and strong expense management,” Joly said.
Total company revenue, including operations in Canada and Mexico, fell 3.6 percent to $11 billion for the period.
A breakout of domestic results by product category follows: