A very merry Christmas at Best Buy with sales booming
NEW YORK (AP) — Best Buy put up some big holiday sales numbers Wednesday, more evidence that Americans are willing and able to spend on gadgets and big TVs.
The nation’s largest consumer electronics chain delivered a better-than-expected 3 percent increase in sales at established stores for the fiscal fourth quarter. The company also issued an annual profit forecast that was roughly in line with Wall Street expectations.
Shares soared nearly 16 percent.
A dire report from the U.S. Commerce Department this month on retail sales cast a pall over the sector, raising concerns that an extended period of elevated consumer confidence had ended abruptly. But the holiday business has proven to be a mixed bag as some retailers are responding faster to a more competitive landscape as well as a shoppers’ shift to online.
Other notable retailers like Walmart also had big holiday quarters. T.J. Maxx parent reported on Wednesday strong sales driven by more customer visits. Macy’s slogged through a tough holiday season and said on Tuesday that 2019 would remain challenging. Meanwhile, a slowdown in the housing market is tempering sales at home improvement chains Home Depot and Lowe’s.
J.C. Penney, Target and Nordstrom are among the retailers that will report final fourth-quarter figures in the next few days.
Still, a slowdown in the economy could present challenges to retailers. And declining tax refunds could dampen spending in the first quarter. In fact, Best Buy acknowledged that it has seen some weakness in sales during the current quarter as the volume and dollar amount of tax refunds has fallen. It said it was monitoring the situation.
Nevertheless, Best Buy has excelled in holding off increasing competition from Amazon and other players by expanding its online business, speeding up deliveries and adding more services to enhance its relationship with its customers. Online sales now account for 22 percent of its U.S. business.
It was only a few years ago when skeptics were ready to write the obituary of Best Buy. But under Hubert Joly, who took over the helm as CEO in 2012, the company is being reinvented. While the chain is focusing on driving online revenue, it’s also working to build deeper relationships and increase total revenue from customers who are shopping both online and in stores. That means reducing the time a customer has to spend at the pickup counter.
It’s also means expanding services. Its free adviser service where salespeople visit customers at home to make recommendations on TVs and other electronics has been doing well. Last year, it launched a service that costs $199.99 a year that offers unlimited Geek Squad technical support. As of the latest quarter, it has signed up more than one million members.
The company is also pushing more into the health field, acquiring a company last year called GreatCall that provides emergency response devices for the aging.
Additionally, Best Buy said that it now offers same-day delivery on thousands of items in 40 metropolitan areas and next day delivery in 60 metropolitan areas.
“Historically...we’ve been focused on transactions and selling products,” Joly told investors during the earnings call on Wednesday. “We’re moving toward selling solutions and building relationships. This journey is at the beginning and we’re learning.”
The Richfield, Minnesota, company, posted per-share earnings of $2.72, beating last year’s fourth quarter’s $2.42. It also topped the $2.56 that analysts were expecting, as well as its own previous guidance. For the year, earnings per share came in at $5.32, surpassing last year’s $4.42.
The company estimates earnings for the next fiscal year to be in the $5.45 to $5.65, which is roughly in line with the $5.49 that Wall Street has been projecting.
Best Buy said comparable-stores sales, a key indicator of a company’s health, rose 4.8 percent for the year, extending its streak to five years of growth.
Best Buy raised its quarterly dividend by 11 percent, to 50 cents per share. The board of directors also approved a new $3 billion stock repurchase, replacing an existing authorization to repurchase $1.5 billion of the company’s shares.
Shares rose $10.13 per share to $70.44 in mid-day trading.
AP Business Writer Matt Ott in Madrid contributed to this report.