- Cost cuts have helped chain weather weak electronics market
- Revenue ekes out small gain, driven by wearables, appliances
Best Buy Co. rose as much as 17 percent after its second-quarter results boosted confidence that Chief Executive Officer Hubert Joly can return the largest U.S. electronics retailer to consistent growth.
Profit was 57 cents a share, excluding some items, the Richfield, Minnesota-based company said Tuesday in a statement. Analysts projected 43 cents, on average. The stock climbed as high as $38.39 in New York, the biggest intraday increase in about a year.
The results signal that Joly may finally be turning around the chain after years of sluggish growth. Though online competition and a weakening electronics industry have made it tough to boost revenue, Joly has kept Best Buy profitable by selling foreign divisions and cutting costs since taking over as CEO in 2012. The company also has made strides in its online business, which posted a 24 percent sales increase in the U.S. last quarter even in the face of staunch competition from Amazon.com Inc.’s Prime Day sales event.
Best Buy’s second-quarter performance “is evidence that a well-managed brick-and-mortar retailer with a well-thought-out strategy that successfully utilizes its physical assets can thrive as it transitions to a true multichannel retailer,” said Charlie O’Shea, an analyst at Moody’s Investors Service.
The company even managed to eke out a top-line revenue gain last quarter, helped by rising demand for wearable technology, appliances and home-theater gear. Revenue of $8.53 billion was about $5 million higher than a year earlier and surpassed analysts’ $8.39 billion average estimate.
Comparable sales rose 0.8 percent, while analysts’ had projected a 0.6 percent decrease, according to Consensus Metrix.
The report lifted shares of some of Best Buy’s suppliers. Fitbit Inc., a producer of fitness trackers, rose as much as 4.8 percent, and wearable-camera maker GoPro Inc. advanced 5.2 percent.
Best Buy boosted its forecast for operating income, projecting that the measure would rise at a low-single-digit percentage rate. That’s up from a previous estimate that profit on that basis would be flat. The company reaffirmed a forecast that revenue would be little changed.
Best Buy’s results are even more impressive given that it was competing against Amazon’s Prime Day promotions and a “steady diet” of discounts from Wal-Mart Stores Inc., O’Shea said. The online sales gain also is notable because Best Buy’s e-commerce business is relatively large compared to its overall revenue, he said. Best Buy said U.S. online sales accounted for 10.6 percent of total revenue from the country, an increase of 2 percentage points from a year earlier.
The company has increased comparable-store sales in six of the past eight quarters and said it continues to take market share from competitors across categories with its assortment and improved customer experience.
“The Best Buy growth story is really starting to emerge,” Joly said on a call with reporters “Like any space in retail, there are winners and losers. We’ve raised the bar.”