Computing extends 10-quarter growth streak as CEO transition nears
Best Buy reported stronger-than-expected second-quarter results on Thursday, prompting the electronics retailer to lift its full-year financial guidance and offering a window into the priorities of its incoming chief executive.
Comparable sales in the quarter rose 4.1%, above both analyst forecasts of 1.3% growth and Best Buy’s internal expectations. Total revenue increased 3.6% to $9.78 billion, ahead of the $9.59 billion analysts had projected, according to FactSet. Profit reached $315 million, or $1.48 per share, compared with $186 million, or 87 cents per share, a year earlier. Adjusted earnings per share of $1.47 topped analyst estimates of $1.39.
The company raised its full-year adjusted EPS forecast to $6.70–$6.90 from $6.30–$6.60 and its revenue outlook to $42.3–$42.8 billion from $41.2–$42.1 billion. It now projects comparable sales for the full year of up 1.9% to 3%, an improvement from its prior view of down 1% to up 1%.
Outgoing CEO Corie Barry attributed the quarter’s performance to customers’ willingness to spend on higher-priced items despite economic pressure. “While customers continue to be thoughtful about big-ticket purchases, they are willing to spend on high-price-point products,” Barry told analysts Thursday.
Computing remained Best Buy’s sales leader, marking 10 consecutive quarters of growth. The category benefited from strength in home theater as well. However, the company expects computing growth to moderate somewhat in the second half of the year, noting that comparisons will be tougher after sales were lifted last year when Windows 10 reached its end of life.
To offset that expected softening, executives are looking to emerging categories. Sales in new product areas, including AI glasses, health rings and trading cards, more than doubled in the second quarter. The upcoming fall release of the Grand Theft Auto video game is also expected to support software and hardware sales in the fourth quarter.
For the current quarter, Best Buy forecasts comparable sales of up 1% to 3%, above analysts’ projection of a 0.1% uptick.
Jason Bonfig, who currently serves as Best Buy’s chief customer, product and fulfillment officer, outlined strategic priorities he plans to pursue once he takes over as CEO in November. Those include new medium- and small-format store locations, a broader product assortment and a focus on the company’s advertising business.
The quarter’s strength “reflects both the deliberate actions we have taken to position the business for growth and a healthy demand environment for our category,” Bonfig said.
The company has also made other leadership changes. Anne Bramman, a former Nordstrom executive, joined Best Buy as finance chief earlier this month.
Despite the quarterly beat and the raised guidance, Best Buy shares declined 6% in premarket trading. The decline followed a 40% run-up in the stock over the preceding six months.
Best Buy attributed the results to investments made in key areas in recent years, including adding specialty expertise in stores, partnering more closely with vendors to bring in new products and improving fulfillment speed and supply chain execution.