Updated!Best Buy said strength in gaming and mobile helped drive a 1.1 percent increase in fiscal first-quarter revenue in the U.S.
Sales here hit $7.9 billion for the three months ended April 30, and same-store sales increased 1.4 percent, representing the eighth comp gain in the last 11 quarters. Revenue was also buoyed by the late arrival of federal tax refund checks, CEO Hubert Joly said, but was partially offset by the closures of 12 big-box and 40 Best Buy Mobile stores over the trailing 12 months.
Online sales climbed 22.5 percent in the U.S. to $1 billion, the company’s first billion-dollar digital haul during a non-holiday quarter. Best Buy attributed the gain to increased traffic and higher conversion rates, and noted that online sales now represent nearly 13 percent of total domestic revenue, up from 10.6 percent a year ago.
Revenue from the international division, now comprised of Canada and Mexico, was essentially flat, up 0.3 percent to $616 million, driven by a comp increase of 4 percent.
Net earnings fell 18 percent, to $188 million, due to a one-time windfall of $183 million last year, stemming from a CRT price-fixing settlement from vendors.
On the product front, top comp-sale gainers in the U.S. were gaming – likely driven by the March release of Nintendo’s Switch console – as well as connected home and computing. The latter enjoyed a better-than-expected lift from mobile, spurred perhaps by last month’s launch of the LG G6 and Samsung Galaxy S8 flagship phones, while tablets continued their decline.
Appliances, which now comprise 10 percent of Best Buy’s mix, enjoyed a 4.6 percent comp increase on top of a 14.3 percent gain last year (see chart, below), presumably aided by hhgregg’s store closures and Sears’ majap market-share declines.
Source: Best Buy Co. Inc.
From a profit perspective, appliances and home theater attained higher margin rates, but the benefits were partially offset by margin pressure in mobile and higher sales in the lower-margin gaming category, the company said.
Best Buy’s results exceeded its own and Wall Street’s forecasts, sending its shares up 15 percent in morning trading and earning praise from retail analysts.
According to Credit Suisse’s Seth Sigman, the solid results provided “further evidence of the health of the category, the benefits from an improving online and competitive position, and its focus on expense management.”
Wolfe Research’s Scott Mushkin concurred. “Best Buy, in our opinion, is turning into an exceptionally run company and is finding additional revenue streams as well as further cost savings to continuously show better profit and return on investment capital,” he wrote in a research note. “Moreover, the solid work of the management team is overcoming the secular challenges in the industry and our fears regarding the TV cycle.”
CEO Joly offered his own take. “Our Q1 performance reflects the strength of our customer value proposition and continued momentum in the execution of our strategy,” he said. “We are energized about our opportunities and the strategy we are pursuing. We believe we are uniquely positioned to help our customers in meaningful way with our combination of multichannel assets, including our online, store and in-home capabilities.”
Looking ahead, the No. 1 CE chain raised its full-year outlook for companywide revenue growth to 2.5 percent, aided by an extra week in its fiscal calendar that falls during the frenetic fourth quarter.