OZ CE & Appliance Retailers Can Take Heart From Latest Best Buy Results

Sean Reid
March 2, 2018

Apparently, those 250 stores that are being shut down have only contributed 1% to Best Buy's overall revenue, which is just a blip on the radar. The missed targets overshadowed Nordstrom's healthy 2.6 percent increase in sales at established stores, which is a key measure of a retailer's health.

The impressive results speak "to the strength of Best Buy's brick-and-mortar footprint, as well as reinforces our view that consumers still value the store experience", said Moody's retail analyst Charlie O'Shea. Best Buy started remodeling some of its mobile departments in its big box stores a year ago as part of a company project, Mobile 2020. Macy's broke out of its three-year sales funk, and a strong home-improvement market pushed Home Depot's profit higher.

The company didn't say how many employees would be affected.

The company opened its first retail store in 2006, prior to the launch of Apple's first iPhone and when margins in the business were high, Hubert Joy, Best Buy Chief Executive, told employees in an internal memo.

Sales at established stores jumped 9 percent in the fourth quarter ended February 3, triple the average estimate of analysts for a 2.9 percent increase, according to Consensus Metrix. The negative impact of the new tax law was about $1.17 in diluted earnings per share; otherwise, non-GAAP diluted earnings from continuing operations in the quarter rose 25% to $2.42 per share, beating FactSet's consensus of $2.04 per share. Removing an extra week of sales in the quarter, same-store sales rose a still-robust 8%, the company said.

Best Buy's net income dropped to $364 million, or $1.23 per share, from $607 million, or $1.91 a share, a year ago, during a quarter that included an extra week.

Adjusted for one-time gains and costs, earnings per share were $2.42, a bump of 26 percent that far outpaced the $2.05 per-share projections from analysts, according to Zacks Investment Research. Customers are responding very positively to our Best Buy 2020 strategy, and I want to enthusiastically thank all our associates for their great work in delivering these results. Even though the dedicated phone shops will all be closing, Best Buy will continue to sell mobile devices in its regular big-box stores and online. Excluding these charges, earnings were $2.42 per share.

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