An Early Christmas Gift for Best Buy
Best Buy's long-term COVID strategy turbo-boosted the retailer's same-store sales during the third quarter.
The company, which has been leveraging its physical stores to facilitate higher online sales during the pandemic, reported that comps rose by an impressive 23% in the fiscal third quarter that ended on Oct. 31. Online comps soared more than 173% in the quarter. And earnings per share were $2.06, well ahead of the Wall Street consensus estimate of $1.66. Profit was $391 million, or $1.48 per share, compared with $293 million, or $1.10 per share, in the year-ago period.
“Our comparable sales grew a remarkable 23% as we leveraged our unique capabilities, including our supply chain expertise, flexible store operating model and ability to shift quickly to digital, to meet what is clearly elevated demand for products that help customers work, learn, cook, entertain and connect in their homes," said Corie Barry, Best Buy CEO.
Despite all of that good news, the company declined again to provide a forecast. It also hinted that sales during the all-important holiday quarter might be lackluster.
“It’s likely that some of that continues on as we go into the beginning of next year,” Best Buy CFO Matt Bilunas said on a call with analysts. After that, it “may start to subside a bit.”
Best Buy launched its Black Friday event earlier this year, in early October, front-loading some of its holiday sales into third quarter. Bilunas also said the company will have higher supply chain costs from shipping video game consoles that will pressure profits in fourth quarter.
“We believe our Q4 sales growth will be positive, but we don’t expect sales trends to remain at the levels we experienced during Q3,” he said.
Still, the retailer has shown great strength pivoting to meet shopper needs during the pandemic. The company quickly rolled out curbside pickup and converted some stores into micro fulfillment centers earlier this year. Best Buy is also testing new store formats that will operate as fulfillment hubs.
For example, in four Minneapolis locations, Best Buy reduced its square footage for shopping to 15,000 square feet from an average of 27,000. The product assortment on the sales floor will still include the primary categories these locations featured before the remodel, but instead the focus will be on the most popular items, the retailer said. The remodels will result in increased space for staging product for in-store pickup and to help ship-from-store transactions, as well as provide the ability to stage inventory for items that may not be on the sales floor.
Best Buy joins Walmart, Target, Home Depot and Lowe’s in reporting strong fiscal results this fall.
Minneapolis-based Best Buy operates 1,204 stores in the U.S., Mexico and Canada.