Best Buy Earnings: Finally Figuring Out The Internet
Best Buy Earnings: Finally Figuring Out The Internet
(Bloomberg) -- Best Buy's quarterly financial results on Tuesday were downright Amazon-like: Consecutive quarters of double-digit online sales growth. Hot new products including virtual-reality headsets and techy watches. Words like "exploration" and "experimentation."
Gone were the store-closing announcements of quarters past, along with talk of bad weather or other tired excuses for why consumers aren't shopping (many of which we've heard from Target, Macy's and other retailers in recent weeks). Shares surged 19 percent on the news, marking Best Buy's biggest one-day stock gain since 2001.
For months, Wall Street had fretted about how Best Buy would deal with falling prices for TVs and other gadgets, as well as five straight months of falling U.S. electronics sales, according to the U.S. Census Bureau. Analysts followed by Bloomberg cut their 12-month stock-price target to around $32, from more than $40 last August.
But Best Buy on Tuesday said its comparable sales rose 0.8 percent in the second quarter from the year before, which means the company bucked some scary industry trends. Across the globe, smartphone shipments are forecast to increase just 3 percent this year from 2015, according to research firm IDC, compared to 30 to 50 percent growth rates in prior years. Apple, the biggest seller of tablets, just barely avoided a tenth consecutive quarter of falling iPad sales. Personal computer sales are likely to decline for the fifth straight year.
Those are daunting statistics for any company that sells consumer electronics. But even as the three biggest computing device categories slow, it seems Best Buy is not only holding its own, it's also stealing sales from other, even more challenged retailers. It's also benefiting from closures of its underperforming stores, which no longer weigh on its books.
Plus, it looks like it's finally learning a thing or two from some of its biggest vendors, such as Apple. On Tuesday it outlined a series of pilot programs that sounded awfully Apple-like, including in-store classes on WiFi use and digital photography.
Another initiative pulls a page from former Apple store mastermind Ron Johnson's new startup, Enjoy, which sells high-end consumer electronics online but provides free in-home installation and setup services. Best Buy said it's testing a similar in-home adviser program, as well as on-demand, same-day services for customers who need immediate tech help.
Perhaps more importantly, the company has also plunged resources into a more-streamlined online checkout process, faster shipping and better website features such as consumer reviews and product recommendations.
Best Buy is late to improving its online offerings; Apple and Amazon have done such things for more than a decade.
Still, its work seems to be paying off: Best Buy's online sales growth has outperformed rivals Walmart and Target for some time now, and they are outpacing the overall U.S. e-commerce market. Online sales now make up more than a tenth of Best Buy's $40 billion in annual revenue.
Some of Best Buy's efforts may wind up being buzz-generating but short-lived experiments. And it's not clear what took the company so long to realize Amazon and Apple had changed people's expectations about shopping for consumer electronics. But for now it seems Best Buy has finally realized it's 2016.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
To contact the authors of this story: Shelly Banjo in New York at sbanjo@bloomberg.net, Shira Ovide in New York at sovide@bloomberg.net.
To contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.net.