Although it beat Wall Street expectations, Best Buy posted a sharp earnings decline in the second quarter as cost savings failed to make up for lower revenues. Domestic store sales slipped even as consumers spent more money on Bestbuy.com.
For the three months ended August 2, Best Buy revenue came in at $8.9 billion versus $9.27 billion in the period a year ago, while net earnings were $147 million, or 42 cents per diluted share, compared to $266 million, or 77 cents per diluted share, in the annum earlier. Operating income fell to $238 million from $413 million in last year’s second quarter. Adjusted earnings per share improved, however, registering at 44 cents per share versus 32 cents in last year’s quarter. A Zacks Consensus Estimate of financial analysts called for adjusted earnings per share of 31 cents.
Best Buy domestic revenue declined 2.4% to $7.59 billion from the year-prior period. Best Buy attributed the slide primarily to a comparable store sales decline of 2% and a revenue decline of $20 million due to the less favorable economics of a new credit card agreement. Best Buy noted that domestic online revenue reached $581 million and comparable online sales increased 22% based on substantially improved inventory availability made possible by the chain-wide rollout of a ship-from-store capability, a higher average order value and increased traffic driven by greater investment in online digital marketing.
Overall, on the merchandising front, declines in categories including mobile phones, tablets and services more than offset growth in gaming, computing, appliances and televisions, Best Buy acknowledged.
“In the second quarter, we delivered $8.9 billion in revenue and 44 cents in non-GAAP diluted earnings per share versus 32 cents last year,” Hubert Joly, Best Buy president and CEO, said in announcing the financial results. “The ongoing benefits of our Renew Blue cost reduction and other SG&A cost containment initiatives drove these better-than-expected results. On the topline, as expected, sales in the NPD tracked Consumer Electronics categories declined 2.5%, in line with our domestic comparable sales decline of 2%. Like other retailers and as reflected in this quarter’s performance, we continued to see a shift in consumer behavior: Consumers are increasingly researching and buying online. As a result, traffic to our brick and mortar stores continued to decline, yet our in-store conversion and online traffic continued to increase due to the execution of our Renew Blue strategy, which is in direct alignment with this shift. Our Renew Blue strategy is designed to grow our online business, enhance our in-store customer experience and leverage our multi-channel capabilities, all to deliver to our customers great advice, service and convenience at competitive prices in the channel [in which]they want to be served.”