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Best Buy second-quarter online sales growth slows, shares drop

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Reuters

By Nandita Bose

(Reuters) - Best Buy Co Inc on Tuesday reported a drop in online sales growth for the second quarter and offered a profit forecast for the third quarter that fell short of analyst estimates, sending its shares down more than 7 percent in early trading.

The U.S. consumer electronics retailer said domestic online sales rose 10.1 percent in its second quarter. That compared with 12 percent in the first quarter and 31.2 percent in the same period a year ago.

Best Buy's third-quarter profit forecast also disappointed some investors. The retailer said it expects third-quarter adjusted earnings per share of 79 cents to 84 cents, lower than analyst estimates of 92 cents per share.

 

Best Buy Chief Executive Hubert Joly said on an earnings conference call that consumer electronics is a more mature category online, in discussing the slow uptick in online sales in the second quarter.

"Consumer (electronics) is one of the first categories that started to move online. So the overall penetration is higher than in other categories," Joly said.

Online sales make up 15 percent of the company's total domestic sales and represented a 15 percent share of the U.S. consumer electronics market, as of March. It has doubled its online business in the past five years.

The company's online sales and profit forecast for the current quarter overshadowed second quarter sales and profit performance helped by a strong economy. The company also raised its annual sales and earnings guidance.

U.S. consumers are spending more, encouraged by rising wages, low unemployment and tax cuts, spurring sales at most retailers this quarter, including Best Buy rivals Target Corp and Walmart Inc, which also sell consumer electronics.

Earlier this month, the Richfield, Minnesota-based retailer said it would buy health services provider GreatCall Inc for $800 million in cash, its largest acquisition ever, hoping to sell health-related products and services to an aging U.S. population.

Best Buy said second quarter same-store sales, or sales at stores open at least a year, rose 6.2 percent in the quarter, ended Aug. 4, versus analysts' estimates of a 3.8 percent rise.

Excluding charges, Best Buy earned 91 cents per share. Analysts expected 83 cents, according to Thomson Reuters I/B/E/S.

Best Buy expects its annual comparable sales to grow 3.5 percent to 4.5 percent versus its original guidance of flat to 2 percent. It also revised its earnings outlook upward to a range of $4.95 to $5.10 from $4.80 to $5.00

The company said it expects a dip in its third quarter operating income, consistent with its expectations from the start of the year.

Revenue rose to $9.38 billion, beating estimates of $9.28 billion.

Before Tuesday, Best Buy shares had risen about 20 percent year to date.

(Reporting by Nandita Bose in New York; Editing by Jeffrey Benkoe and Steve Orlofsky)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Aug 28 2018 | 7:52 PM IST

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