Photo: Best Buy
Shares of Best Buy took a hit yesterday after the consumer electronics chain announced a decline in same-store sales for the holiday quarter and forecast the same for the first quarter of 2017 due to a softening mobile phone category. While lower comparable revenues are a concern, Best Buy also came out of Q4 2016 with a 27 percent gain in profits while continuing to grow its online business. So did Wall Street overreact?
Count Charlie O’Shea, the lead retail analyst at Moody’s, as one who sees more positives in Best Buy’s performance than negatives.
“Best Buy’s ability to expand margins in Q4 in the face of what we characterized as one of the most promotional holiday seasons we have seen in the last 15 years — especially in Best Buy’s key product categories —is impressive, and indicates that the company maintained significant discipline over its pricing, avoiding the trap of chasing sales,” wrote Mr. O’Shea in an e-mail to RetailWire.
“Online sales growth of almost 18 percent on an already meaningful base is impactful, especially as it results in an online percentage of overall sales rate of almost 19 percent,” he added. “We continue to believe that Best Buy is one of the brick-and-mortar ‘leaders’ in the push online, and expect the company to continue to make incremental progress in its quest to become a true multi- and then omnichannel retailer.”
Best Buy CEO Hubert Joly is also optimistic about the company’s prospects. On an earnings call with analysts yesterday, Mr. Joly announced (via Seeking Alpha) that the “Renew Blue” turnaround plan introduced in Nov. 2012 was “officially over” and that the next phase in its strategic direction called “Best Buy 2020” would concentrate on “creating a company that customers and employees love.”
“We believe we can and should go beyond selling products to customers,” said Mr. Joly. “We want to focus on their underlying needs which is entertainment, communications, security, energy management, and health. We believe this approach will better meet their needs, and build a stronger relationship with them. This will also allow us to expand our addressable market.”