This is the time of the year when we try to measure the health of the consumer by judging the strength of holiday sales. But a better way to look at that all-important season is through the lens of winners and losers. It's clear today that Best Buy belongs in the loser column.
Consumers' paychecks aren't growing quickly enough to put more cash in their pocketbooks (even with lower gas prices), making the retail game one of market share. Victoria's Secret parent L Brands said it had its "best December ever," for example, while Macy's and Gap reported poor holiday sales.
Best Buy joined the latter group on Thursday, saying U.S. sales during the holiday period dropped by 1.2 percent from a year ago, a worse result than expected. The electronics retailer was particularly hard-hit by a 7.2 percent drop in computing and mobile phone sales. Shares fell by as much as 12 percent.
Best Buy's puny results are significant, given RadioShack's bankruptcy and store closures and the dismal state of Sears, one of the country's largest appliance sellers. They are also notable in light of 4.9 percent year-over-year sales growth at established U.S. stores at Game Stop, which now operates 6,900 stores (1,000 of which are dedicated to selling mobile phones and tablets.)
Even more alarming is Best Buy's slowing e-commerce growth, as electronics has been one of the biggest consumer categories to shift online. Best Buy said its online sales were up 12.6 percent in the 9 weeks ended Jan. 2 from the same period a year before, but that's down from 13.4 percent growth last year. And that compares with 20 percent online sales growth across the industry, according to MasterCard Spending Pulse.
That Best Buy blamed much of its weakness on mobile sales is a worrying sign for its future. It also feeds growing fears that sales of the latest iPhones have floundered. Such concerns have pushed Apple shares below $100 for the first time in more than a year and dinged stocks of iPhone suppliers.
Best Buy has hitched its star to Apple in recent years, redesigning 740 departments to more prominently display Apple products. So it has much to lose if Apple sales slow.
Some of Best Buy's other big bets also don't seem to be working out: GoPro, which gets 20 percent of its revenue from Best Buy, according to Bloomberg supply chain data, said this week it will cut 7 percent of its staff after holiday sales came up short. FitBit, which gets 12 percent of its revenue from Best Buy, according to Bloomberg data, saw shares plummet below its IPO price after investors panned the new fitness tracker it unveiled at the Consumer Electronics Show.
So much for the electronic chain's grand plan to turn around its business. For investors, Best Buy certainly isn't living up to its name.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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