NEW YORK (AP) — Best Buy Co reported fiscal third-quarter results that blew through analysts’ expectations as the United States’ (US) largest consumer electronics retailer enjoyed surging demand for items like home theatre and appliances that help people learn, cook, work and connect in their homes during the pandemic.
The Richfield, Minnesota-based retailer, said that third-quarter profits rose 33 per cent while sales were up 21 per cent. Sales at stores opened at least a year rose 23 per cent, while online sales in the US surged 174 per cent.
Still, shares fell five per cent on Tuesday morning trading as Best Buy warned that sales could slow down during the current quarter as the number of virus cases surge.
“As we start the fourth quarter, the demand for the products and services we sell remains at elevated levels, but similar to last quarter, it continues to be difficult for us to predict how sustainable these trends will be,” Best Buy’s Chief Financial Officer Matthew Bilunas told analysts during the call. “In fact, we are seeing COVID cases surge throughout the US and Canada at a time of significant holiday volume through our stores, online and supply chain.”
Bilunas also noted other factors such as potential government stimulus, the risk of continued high employment and the availability of inventory like computers to match customer demand. Best Buy joins big box stores like Walmart, Target, Home Depot and Lowe’s in reporting strong fiscal results. Unlike mall-based stores and other businesses that sell non-essentials, big box retailers were allowed to stay open during the lockdown in the spring and have all seen their dominance increase as consumers focus on necessities and home-related activities.
Before the pandemic, Best Buy had expanded its services to such options as at-home consulting and same-day delivery. It also sped up its online shipping. But the pandemic has forced Best Buy to adjust its operations and launch new shopping experiences that provide more convenience and safety for customers.
Early fall, Best Buy began using 250 of its stores as fast-shipping hubs for online orders. It’s now adding 90 more locations during the holiday period. It says its goal is to have all 340 stores ship more than 70 per cent of its ship-from-store units during the holiday quarter. It’s also testing new store formats as it transforms locations to fulfilment hubs.
For example, in four Minneapolis locations, Best Buy reduced its square footage for shopping to 15,000 square feet from an average of 27,000. The product assortment on the sales floor will still include the primary categories these locations featured before the remodel, but instead the focus will be on the most popular items, the retailer said. The remodels will result in increased space for staging product for in-store pickup and to help ship-from-store transactions, as well as provide the ability to stage inventory for items that may not be on the sales floor.
Best Buy reported fiscal third-quarter profit of USD391 million, or USD1.48 per share, compared with USD293 million, or USD1.10 per share, in the year-ago period. Earnings, adjusted for restructuring costs and amortisation costs, were USD2.06 per share.
The results exceeded Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was for earnings of USD1.76 per share.
The consumer electronics retailer posted revenue of USD11.85 billion in the period, also beating Street forecasts. Eight analysts surveyed by Zacks expected USD11.02 billion.
Shares fell USD6.69 to USD1150 in late morning trading. Shares have increased 39 per cent since the beginning of the year, while the S&P 500 index has increased 11 per cent. The stock has increased 69 per cent in the last 12 months.