Best Buy Q1 profits tops Street amid online, tech-support services growth
Best Buy reported a strong first quarter but did not raise its full-year forecast as it takes into account the potential impact from the increased U.S. tariffs on Chinese imports that went into effect in September.
The consumer electronics giant’s net income totaled $265 million, or 98 cents per share, in the quarter ended May 4, up from $208 million, or 72 cents per share, in the year-ago period. Adjusted EPS was $1.02, ahead of analysts’ estimates of 87 cents.
Gross profit margins expanded 40 basis points in the quarter to 23.7%, driven by high-margin, tech-support services.
Revenue rose to $9.14 billion, in line with estimates, up from $9.12 billion last year. Overall same-store sales rose 1.1%. Domestic same-store sales rose 1.3%. The retailer noted strong demand for appliances, wearables and tablets and its subscription-based tech- support services.
This was the last quarterly earnings report for CEO Hubert Joly, who spearheaded a turnaround at the retailer with a strategy (Best Buy 2020) by focusing on omnichannel sales, support services, and the role technology solutions can play in transforming consumers’ lives. On June 11, Corie Barry, currently CFO and strategic transformation officer, will succeed Joly, at which time Barry will move to the newly created role of executive chairman.
“Q1 was a strong quarter and a good start to the year,” said Joly. “We reported comparable sales growth at the high end of our guidance and delivered better-than-expected profitability. In addition to these strong financial results, we continued to make significant progress implementing our Best Buy 2020 strategy to enrich lives through technology and further develop our competitive differentiation.”
Best Buy forecast adjusted profit for the second quarter to be in the range of $0.95 to $1 per share, above Street expectations of $0.96 per share. The retailer, however, is maintaining its full-year forecast which calls adjusted earnings of $5.55 a share on sales of $43.4 billion. Analysts were looking for earnings of $5.66 a share on sales of $43.6 billion in its fiscal 2020.
“As we look to the full year, we are reiterating the guidance we provided at the beginning of the year,” said Barry. “This outlook balances our better-than-expected Q1 earnings, the fact that it is early in the year and our best estimate of the impact associated with the recent increase in tariffs on goods imported from China. Specifically, I am referring to the increase in tariffs from 10% to 25% on the products on the $200 billion List 3 that originally went into effect last September.”
In comments, analyst Neil Saunders, managing director of GlobalData Retail, applauded Best Buy’s strategy to pivot to new areas, which has helped offset declines in more traditional segments.
“Stores have strong offerings of growth categories like wearables and smart home and offer a high standard of customer service to help guide consumers through the various offerings,” he said. “This is helping to take the edge off the declines in more traditional segments like mobile devices. However, Best Buy is also thinking beyond products by moving into technology services. This is a major part of the company’s future plans and it increases our optimism for medium to longer-term performance.” For more analysis, click here.
No comments found