Best Buy is on a roll
There’s nothing like outperforming expectations to make investors happy. That’s the story at Best Buy, which saw its share price jump as much as 17 percent after the company posted a 0.8 percent gain in total sales for the second quarter, buoyed by strong U.S. sales, compared to analysts’ predictions of a two percent drop.
Best Buy CEO Hubert Joly, speaking with analysts on the retailer’s second quarter earnings call, pointed to three competitive advantages the company has used to drive four straight quarters of same-store sale growth (2.7 percent in the most recent period) in the U.S.
The first competitive edge is Best Buy’s ability to serve its customers in stores, online and in their homes. The company, which operates stores within 15 minutes of 70 percent of the U.S. population, has enhanced its digital shopping experience with its online site and mobile shopping app.
According to Mr. Joly, Best Buy’s focus on offering "advice, service and convenience at competitive prices" has enabled it to achieve market share gains in key categories, including appliances and mobile phones.
Mr. Joly said Best Buy’s second competitive advantage lies in its positioning within the marketplace, which attracts early adopters.
The third competitive advantage is the company’s relationship with its vendors, including a number that now operate store-within-a-store concepts inside of Best Buy locations.
"Not only do we showcase the best of what our vendors offer, we’re also benefiting from the material investments that several of the world’s leading technology companies are making in our stores," said Mr. Joly (via SeekingAlpha). "With these partnerships, we’re able to bring to life interactive technology experiences that again make the Best Buy operating model more relevant for customers."
- Best Buy Reports Fiscal Second Quarter Results – Best Buy Co., Inc.
- Best Buy (BBY) Hubert Joly on Q2 2016 Results – Earnings Call Transcript) – SeekingAlpha
- Best Buy shares soar on robust domestic demand – Financial Times
What do you think are the biggest reasons for Best Buy’s improved performance? What will it need to do to continue to build on the gains it has made?