Finest Purchase beats estimates of sturdy on-line gross sales, however shares are falling on account of a scarcity of trip forecast
Best Buy’s third quarter earnings beat Wall Street’s expectations, but stocks fell on Tuesday as the retailer warned of headwinds from higher shipping costs, inventory challenges, and lower margin vacation sales.
The retailer declined to provide an outlook for the fourth quarter – a significant time to buy electronics and tech over the holidays. due to the uncertainty caused by the coronavirus pandemic.
On a conference call, CFO Matt Bilunas said the company will have higher supply chain costs from package surcharges and make less money because video game consoles, a popular Christmas present, have a lower profit margin.
“We believe our fourth quarter sales growth will be positive, but we don’t expect sales growth to remain at the level we saw in the third quarter,” he said.
The Best Buy share opened the session on Tuesday with a loss of around 5%.
Here’s what the company did in the third fiscal quarter ended October 31:
- Earnings per share: $ 2.06, adjusted versus $ 1.70 expected based on Refinitiv consensus estimates
- Revenue: $ 11.85 billion versus $ 11 billion estimated by Refinitiv
- Revenue growth in the same store: 23% versus 13.6% according to StreetAccount estimates
Corie Barry, CEO of Best Buy, said on a conference call that the company has benefited from Americans spending less on travel and food and more on items for their homes.
“Our current way of life in our homes, which relies on technology, has only strengthened our belief in our strategic direction and purpose,” she said.
Best Buy reported net income of $ 391 million, or $ 1.48 per share, for the third quarter, up from $ 293 million or $ 1.10 per share a year earlier. With no items, it made $ 2.06 per share, more than the analysts surveyed by Refinitiv expected $ 1.70 per share.
Sales rose $ 11.85 billion versus $ 9.76 billion last year, beating Wall Street’s expectations of $ 11 billion.
The company’s sales in the same store increased overall by 23%. Sales in the same store in the US increased 22.6% while international sales rose 27.3%.
Online sales in the US increased 174% to $ 3.82 billion for the quarter. It was the company’s second-best quarter for US online revenue ever, and even outperformed the company’s e-commerce sales in the last holiday season.
Barry said the company is moving fast to try approaches that can drive more sales, serve customers in different ways, and run its online business more efficiently.
It has been remodeling four stores in the Minneapolis area to test new models. In one shop, she said, the area and number of items on display shrank. In another, she said, the store is next to a warehouse and a covered driveway where people can pick up their online orders by curbside pick-up or in lockers.
The company was also reviewing other aspects of its business and decided to exit operations in Mexico, she said.
“As you can see, we’ve looked at our business model from top to bottom to see where we could potentially accelerate our strategic efforts,” she said.
During the pandemic, Best Buy sales have received a boost from home trends as more consumers need technology to set up their home office or help their children attend school remotely. The company has decided to close its stores and only switch to roadside collection in the first few months of the global health crisis – despite being considered an essential retailer.
According to Barry, customers continued to turn to the big box retailer for everything from school kitchen gadgets and laptops to home theater equipment in the third quarter.
“The current environment has underscored our goal of adding technology to life, and the skills we use and strengthen now will help us execute our strategy in the future,” she said in a press release.
At the close of trading on Monday, Best Buy’s shares were up 39% that year, giving the company a market cap of $ 31.6 billion.
Read the full press release on Best Buy earnings here.