Best Buy’s BBY -4.68% gravity-defying ability to retain sales with only curbside pickup and delivery options led some analysts to think the technology-focused retailer could be leaving behind its bricks-and-mortar-heavy past. Not so fast.
The company grew sales by almost 4% from a year earlier in the quarter ended Aug. 3, exceeding analyst estimates, which were based on the preannounced figure of 2.5% sales growth and omitted the final two weeks of the quarter. Earnings per share came in at $1.65, well above analysts’ consensus forecast of $1.07.
Reopening stores had a dramatic impact: Total sales grew roughly 16% year over year in the last seven weeks of the quarter after Best Buy swung doors open to shoppers. In the first six weeks of the quarter, Best Buy had only made stores available for curbside pickup and by-appointment visits. For the first three weeks of August, sales were up 20%.
Products across most categories sold well—particularly computing, appliances and tablets, as more people continued to work, cook and learn from home. Some of its newer categories such as home fitness and outdoor equipment—like hand-held GPS devices—also performed well. As Best Buy started reopening stores, heftier categories such as large appliances and home-theater components sold better, highlighting the importance of in-person shopping for such products.
That doesn’t mean e-commerce slowed down, though. Domestic online revenue grew 242% last quarter from a year earlier, reaching over half of all revenue—the highest it has ever been in a single quarter. Online sales didn’t falter much after stores reopened, staying 180% higher than year-earlier levels in the last seven weeks of the quarter and 175% higher in the first three weeks of August. E-commerce sales didn’t come without costs, though: Gross profit declined partly due to higher parcel expenses.
A Best Buy curbside pickup station in Montebello, Calif., during the coronavirus pandemic, in April.
Photo: Image Of Sport/Zuma PressSince both bricks-and-mortar and digital have proven to be crucial for Best Buy, the company is looking at changing the way it uses stores, rather than reducing its bricks-and-mortar footprint. Chief Executive Corie Barry said starting next month, the company will pilot a “ship from store hub” model ahead of the holiday season. That will allow some stores—picked based on size and proximity to carrier partners—to ship out significantly higher volumes for same- and next-day delivery.
Despite stronger-than-expected results, Best Buy shares were down 6% as of Tuesday morning. This may have been due to cautious commentary on the current quarter: Best Buy said it isn’t likely to maintain the 20% pace of revenue growth that it is recording now because of uncertainty around a future stimulus package and the potential for prolonged unemployment. Plus, margins will likely weaken as reopened stores will require normal staffing levels and more advertising.
Such concerns, however, seem overdone. Product launches coming later this year, including a new iPhone and next-generation gaming consoles, should help keep sales elevated through the holiday season. If any retailer has proven itself worthy of the benefit of the doubt this year, it is Best Buy.
Write to Jinjoo Lee at jinjoo.lee@wsj.com
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