Consumer electronics giant starts the year strong; to roll out home service
Demand for gaming and mobile products boosted Best Buy’s first-quarter comparable sales, as the retailer beat the Street on profit and sales.
Best Buy revenues rose 1% to $8.53 billion for the period ended April 29, 2017, beating analysts’ estimates of $8.28 billion, from $8.44 billion in the year-ago period. Net income fell to $188 million, or 60 cents a share, easily beating the Street and down from $229 million, or 70 cents per share a year earlier when it benefitted from some settlement proceeds.
The biggest surprise was the company’s unexpected sales gain. Comparable sales increased by 1.6% during the quarter, beating analysts’ predictions for a 1.5% decline.
“Our enterprise comparable sales … were driven by growth in both the domestic and international segments,” said Hubert Joly, Best Buy chairman and CEO. “On the profitability side, at the enterprise level, we continued to optimize merchandise margins and exercise good expense management. Our revenue was higher due to strong performance in gaming, a better-than-expected result in mobile, and the improvement of overall sales trends due to the arrival of delayed federal tax refund checks.”
Best Buy's domestic online revenue of $1.02 billion increased 22.5% on a comparable basis, primarily due to higher conversion rates and in-creased traffic. As a percentage of total domestic revenue, online revenue increased 230 basis points to 12.9% versus 10.6% last year.
“Despite the continued surge of Amazon, the most encouraging figure from today's results is that Best Buy is succeeding and growing share in the digital part of the market,” commented Neil Saunders, managing di-rector of GlobalData Retail. “This alone is a very helpful dynamic; but when put alongside the benefits that stores provide, we believe it gives best Buy an advantage it can maximize on over the rest of this year and beyond.”
On the chain's quarterly call with analysts, Joly said Best Buy will roll out an in-home advisors program it has been testing in several markets for about a year, the StarTribune reported. As part of the service, consultants make free home visits and advise consumers how to better equip their homes with the latest technology.
The company forecasts similar performance for the second quarter, predicting “enterprise comparable sales growth in the range of 1.5% to 2.5%, and non-GAAP diluted EPS in the range of $0.57 to $0.62,” according to Best Buy CFO Corie Barry.
Looking out to the rest of its fiscal year, which has one extra week compared to fiscal 2017, Best Buy expects enterprise revenue to be in the range of $8.6 billion to $8.7 billion, and is planning for a comparable sales change in the range of 1.5% to 2.5%. It also revised its expectations for revenue growth, which Best Buy now expects to grow by approximately 2.5%.
Dollar Tree Q1 profit falls due to charge
Dollar Tree's profit declined in the first quarter amid an impairment charge related to its divesture to Dollar Express.
The company's net income fell to $200.5 million, or 85 cents per share, in the quarter ended April 29, from $232.7 million, or 98 cents per share, in the year-ago period which included a tax rate benefit. Dollar Tree said it recorded an impairment charge of $50.9 million in the quarter ended April 29, due to non-payment by Dollar Express for stores bought from the company. Dollar Express is in the process of liquidating and is in default of its obligations and not cooperating, Dollar Tree said.
Adjusting for the current quarter’s receivable impairment charge and the prior year quarter’s one-time tax benefit, Dollar Tree's diluted earnings per share improved 10.1% to an adjusted $0.98, compared to an adjusted $0.89 from the prior year quarter.
Consolidated net sales increased 4.0% to $5.29 billion, from $5.09 billion last year. Same-store sales rose 0.5%, lower than analysts expected. Same-store sales for the Dollar Tree banner increased 2.5%. Same-store sales for the Family Dollar banner decreased 1.2%.
"I am extremely pleased with the first quarter performance of our Dollar Tree banner and with the continued progress in re-building the Family Dollar business,” stated Bob Sasser, CEO. "The Dollar Tree banner continues to generate results that are strong, consistent and growing and we are enthusiastic about the opportunity to improve the Family Dollar business as we launch our renovation initiatives in the second quarter."
During the quarter, the retailer opened 164 stores, expanded or relocated 51 stores, and closed 16 stores. Dollar Tree operated 14,482 stores under three banners and across 48 states and five Canadian provinces as of April 29, 2017.
Dollar Tree estimates consolidated net sales for the second quarter of 2017 to range from $5.18 billion to $5.28 billion, based on a slightly positive to low single-digit increase in same-store sales for the combined enterprise. Diluted earnings per share are estimated to be in the range of $0.80 to $0.88.
"I believe we are squarely positioned in the most attractive sector of retail," said Sasser. "Value and convenience are important to our shoppers, and that is exactly what our Dollar Tree and Family Dollar businesses are focused on providing. We have a proven business model, an experienced leadership team, many years of store growth ahead of us, and tremendous opportunities to continue improving our businesses to deliver value to our long-term shareholders.”
Sears Q1 sales fall 20% but posts first quarterly profit in two years amid cuts
There was a glimmer of good news in Sears Holdings Corp.'s first quarter earnings report.
The embattled retailer reported its first quarterly profit since 2015, which it attributed largely to the sale of its Craftsman brand, and lower expenses due to its $1.25 billion cost-cutting plan. Sears posted net income of $244 million in the quarter ended April 29, compared with a loss of $471 million in the year-ago period. However, Sears posted a loss of $230 million when adjusted for special items, compared with a loss of $199 million a year earlier.
On the revenue side, Sears continues to bleed. Revenue fell 20.3% to $4.3 billion in the quarter, down from $5.4 billion last year. The retailer said the year-over-year decline was primarily driven by having fewer Kmart and Sears full-line stores in operation as well as an 11.9% drop in same-store sales.
Same-store sales at Sears stores fell 12.4% and 11.2% at Kmart. The decline at Sears were attributed to falling sales of home appliances, apparel, and lawn and garden items. Kmart declines were attributed to weakness in grocery and household items, pharmacy, apparel, and home categories.
Selling and general expenses decreased about 16% to $1.27 billion in the quarter, leading to a near-third drop in total costs to $4 billion.
“While this was certainly a challenging quarter for our company, it was also one that clearly demonstrated our commitment to return Sears Holdings to solid financial footing,” Sears chairman and CEO Eddie Lampert said in a statement. “We recognize that we need to accelerate our efforts to improve our operational performance.”
Earlier this week, Sears announced it had struck deals to extend the maturity of its debt and of some of its pension obligations, and pass off some of its pension obligations.