Over the last few years, Best Buy has taken the internet’s snide jokes about using its stores as an Amazon showroom, listened to them, and then stubbornly refused to go out of business. Best Buy calls its results this quarter “better than expected,” which is true, but their continuing existence is also “better than expected.” It’s the last national big-box electronics retailer standing, with $39.5 billion in revenue during the fiscal year that ended in January 2016 and growing online sales.
Let’s take a look at how the company is doing, based on its most recent quarterly report.
Signs of life: Best Buy presents its numbers based on comparable store sales: stores that just opened or that closed during the year aren’t included in the numbers. Based on that, their total revenue is down just .1% quarter, across their whole business, including international stores.
Online sales went up 24% compared to this time last year, which is an impressive boost. Appliance sales increased slightly, another great sign. While the company didn’t break out the amount of appliance sales in their report, the percentage of their total income that Best Buy took in from appliances increased slightly, from 8% to 9%.
Attracting appliance sales is important for the company’s future. In the coming years, if more Sears stores close, customers who might have gone to Sears to buy their home appliances have to go somewhere, and some of that business will go to Best Buy.
The company reports that stronger sales of wearable devices boosted their income from consumer electronics, but didn’t break out the sales increase for just that category apart from consumer electronics in general.
People rushing to the store to buy a new TV for the Super Bowl is apparently a real thing, since Best Buy noticed a tiny effect (.8%) on their sales from having the big game fall during the month of February, since their fiscal year begins on February 1. Super Bowl 2017 will also be in February, making direct comparisons between the quarters possible.
Symptoms to watch: Most of Best Buy’s business depends on consumer whims and on what other companies choose to do, like smartphone makers’ release schedules, game release schedules, and even the timing of the Super Bowl.
While manufacturers making devices that are more durable is generally a good thing for consumers, it’s not as great for Best Buy’s Geek Squad repair and services unit. The company’s sales of services in general were down 10.7%, and it reported that warranty repair services were down. Spending less time separated from their devices is great for consumers, but losing that income is bad for Best Buy.
The percentage of the retailer’s revenue that came from computers and mobile phones stayed the same since this time last year: it was 47%. Total revenue was down slightly, making computer and phone sales an issue in need of watchful waiting: since the beginning of 2015, the major mobile carriers have announced that they’re discontinuing contract plans.
Selling phones for cash or on installment plans should mean higher revenue, if not necessarily higher profits, but it’s stayed flat since 2015. Best Buy decided last year predicted that this change would stop making a difference by now, and stopped calculating the effect that this business model change has on their raw sales numbers.
How investors reacted: Shares dropped 7% after the earnings call on Tuesday morning, because of the small drop in revenues and profits, but largely because the company announced that chief financial officer Sharon McCollam will step down next month. The results that were better than expected might have prevented such a drop, but experts see McCollam as an important part of the company’s recovery over the last few years.
Prognosis: The future outlook for Best Buy remains good. Don’t rush over to cash in your gift cards just yet. Like its fellow mall anchor JCPenney, the chain has figured out the wisdom of having stores-in-stores, and has been transforming its stores into gadget food courts full of different brands. That sounds like we’re making fun of them, but we’re really not: this strategy is working for early participants in the mini-store concept like Samsung and Sony, and has been really great for home theater sales.
Especially if Best Buy is able to continue whatever is enticing more people to shop on their website, Best Buy is one mall anchor that’s generally going against the trend of mall anchor crappiness. Barring bad management or unforeseen problems, don’t worry about Best Buy: worry about the rest of the anchors in the average mall.
by Laura Northrup via Consumerist
No comments:
Post a Comment