- Best Buy's same-store sales grew by 23% and its online sales in the U.S. grew by 174% in the third quarter.
- Despite its strong performance, the retailer declined to provide an outlook due to the uncertainty created by the coronavirus pandemic.
- Customers have shopped at the big-box retailer for everything from kitchen appliances to laptops during the pandemic.
- "The current environment has underscored our purpose to enrich lives through technology, and the capabilities we are flexing and strengthening now will benefit us going forward as we execute our strategy," CEO Corie Barry said.
Best Buy's third-quarter earnings soared past Wall Street's expectations, but shares dropped Tuesday as the retailer warned of headwinds from higher shipping costs, inventory challenges and lower-margin holiday sales.
The retailer declined to provide an outlook for the fourth quarter — a significant period for electronics and tech purchases during the holidays — due to the uncertainty created by the coronavirus pandemic.
On a conference call, Chief Financial Officer Matt Bilunas said the company will have higher supply chain costs from parcel surcharges and sales of videogame consoles, a popular holiday gift that's lower margin, will pressure profits.
"We believe our Q4 sales growth will be positive, but we don't expect sales trends to remain at the levels we experienced during Q3," he said.
Best Buy shares closed Tuesday down nearly 7% to $113.54. Its stock has gained about 29% so far this year, bringing the company's market value to $29.4 billion.
Here's what the company did in the fiscal third quarter ended Oct. 31:
- Earnings per share: $2.06, adjusted vs. $1.70 expected by Refinitiv's consensus estimates
- Revenue: $11.85 billion vs. $11 billion expected by Refinitiv estimates
- Same-store sales growth: 23% vs. 13.6% expected by StreetAccount estimates
Best Buy CEO Corie Barry said on a conference call that the company has benefited from Americans spending less on travel and dining out and more on items for their homes.
"Our current way of life in our homes reliant on technology has only reinforced our belief in our strategic direction and purpose," she said.
Best Buy reported third-quarter net income of $391 million, or $1.48 per share, from $293 million, or $1.10 per share, a year earlier. Excluding items, it earned $2.06 per share, higher than the $1.70 per share expected by analysts surveyed by Refinitiv.
Revenue rose to $11.85 billion from $9.76 billion a year earlier, which beat Wall Street's expectations of $11 billion.
The company's same-store sales grew by 23% overall. U.S. same-store sales were up 22.6% while they were 27.3% higher internationally.
Online revenue in the U.S. jumped by 174% to $3.82 billion in the quarter. It was the company's second-best quarter for U.S. online revenue ever, even besting the company's e-commerce sales during last holiday season.
Barry said the company is moving quickly to try approaches that can drive more sales, serve customers in different ways and run its online business more efficiently.
It has remodeled four stores in the Minneapolis area to test new models. In one store, she said, it shrank the square footage and number of items on display. In another, she said, the store is next to a warehouse and a covered drive-up where people can get their online orders by curbside pickup or retrieve them in lockers.
The company also reviewed other aspects of its business and decided to exit operations in Mexico, she said.
"As you can see, we have been examining our business model from top to bottom, to determine where we may be able to accelerate our strategic efforts," she said.
During the pandemic, Best Buy's sales have gotten a boost from stay-at-home trends as more consumers need technology to set up their home office or to help their children go to school remotely. The company decided to shut its stores and switch to curbside pickup only in the early months of the global health crisis — despite being deemed an essential retailer.
Barry said customers continued to turn to the big-box retailer in the third quarter to get everything from kitchen appliances and laptops for school to home theater equipment.
"The current environment has underscored our purpose to enrich lives through technology, and the capabilities we are flexing and strengthening now will benefit us going forward as we execute our strategy," she said in a press release.