Best Buy Prevails with Speed and Brand Strength
Same store sales at Best Buy declined 5.7% in the first quarter, but the figure could have been so much worse if the company hadn’t quickly implemented a curbside pick-up model.
“In the middle of Q1, we shifted all our stores to a curbside-only operating model and were able to retain approximately 81% of last year’s sales during the last six weeks of the quarter, even though not a single customer set foot in our stores,” said Best Buy CEO Corie Barry. “The strong sales retention is a testament to the strength of our multi-channel capabilities and the strategic investments we have been making over the past several years.”
Best Buy’s first quarter ended on May 2, but beginning on March 22, the company shifted to a shifted to a contactless curbside-only operating model for all its domestic stores on a temporary basis. The company also continued to sell large products such as appliances for delivery, where allowed, but suspended in-home installations. Roughly five weeks later on April 27, after implementing new safety guidelines, the company resumed services like large product delivery and in-home installations and repairs in approximately 80% of U.S. ZIP codes for new orders.
A few days after its second quarter began, Best Buy began allowing customers back inside stores in ways that followed strict social distancing practices and use of proper protective equipment. Specifically, the company began offering a new appointment only consultation service in stores. The company currently has nearly 700 stores, or approximately 70% of its store base, operating this way. In addition, the company is evaluating additional changes, including expanding store hours and opening some stores beyond our current appointment-only model.
Despite the restrictions on setting foot inside physical stores, Best Buy’s domestic revenues declined only 6.7% to $7.92 billion, due to the 5.7% comp decline and permanent closure of 24 stores. Meanwhile, domestic online revenue surged 155.4% to $3.34 billion and represented 42.2% of domestic sales versus 15.4% last year.
“As challenging as the current situation is, I am certain Best Buy will remain a strong, vibrant company that is well positioned to deliver on our purpose and thrive in a new and different environment. In fact, we have taken the opportunity to accelerate aspects of our strategy as this environment has quickly shifted the ways in which customers interact with retailers,” said Barry.
The shift, evident in Best Buy’s ability to drive substantial volume without customers setting food inside stores, led some analysts to question how the retailer is evaluating its store base, with the obvious inference being whether additional closures are contemplated.
“Our stores are absolutely an asset, and they have been an asset throughout this,” Barry said during the first quarter earnings call. “In April, 65% of what we sold online, which is the vast majority of what we sold, was either pickup curbside or shipped from a store.”