Best Buy bounces back on shifting trends in consumer spending
26 Aug 2015
Best Buy, the largest consumer-electronics chain in the US, is powering ahead with its turnaround.
It reported fiscal second-quarter results that handsomely beat analysts' estimates as shoppers picked up major appliances, large-screen televisions and mobile phones.
The stock shot over 12 per cent yesterday.
The company's results were boosted by an overall shift in consumer spending toward big-ticket items in the home as home values improved.
Business also was being helped on an explosion of new gadgets like the Apple watch, which would roll out to all of Best Buy's stores by the end of September.
The trend in home spending was also benefiting home-improvement players like Home Depot, which also reported strong second-quarter results last week.
But Best Buy's strong performance also provided strong evidence that it had been able to successfully ride negotiate the pitfalls of the consumer-electronics market as it fought pressures and increased competition from online stores, notably Amazon.com.
''The home focus is very meaningful, when you think about our competitive advantages,'' Best Buy's CEO Hubert Joly said yesterday, The Columbus Dispatch reported from wire reports.
Only a few years ago commentators were questioning how a big-box retailer could compete in a shifting landscape where shoppers were increasingly researching products at big stores and then buying online for a lower price.
According to commentators, Best Buy chief executive Hubert Joly was making good on the second part of his turnaround plan at the world's largest electronics chain - revenue growth.
The retailer posted its fourth straight quarter of same-store gains yesterday, with growth of 3.8 per cent in the latest period, which came in as the biggest increase in four years and more than triple the 1 per cent projected by analysts, estimates compiled by Consensus Metrix showed.
Joly was in the third year of a comeback bid at Best Buy, and the results so far had been mixed. He was initially focused on cutting costs, including selling off foreign divisions in China and Europe.
Management had also devoted more shelf space to top brands, including announcing yesterday that it would increase distribution of the Apple Watch 10-fold.
