Best Buy Prove That JB HI Fi Still Can Achieve Growth, Up Against Amazon
Despite being beaten up by Amazon, US retailer Best Buy whose operations are like JB Hi Fi has still managed to grow 1.1% as their competitors deliver double digit declines.
Best Buy said that their strength in gaming and mobile helped drive the increase, in Australia JB Hi Fi is currently looking to significantly expand their gaming and accessories offerings.
During the past 18 months, the retailer has become a significant player in the smartphone market with the Company set to add the new Blackberry to their mobile offering in June.
Sales at Best Buy hit $7.9 billion for the three months ended April 30, and same-store sales increased 1.4 percent, representing the eighth comp gain in the last 11 quarters.
A senior Best Buy executive told ChannelNews at CES that the Company has had to “learn the hard way” how to take on Amazon and still deliver growth.
Online sales climbed 22.5 percent to $1 billion, it was the company’s first billion-dollar digital haul during a non-holiday quarter.
Best Buy attributed the gain to increased traffic and higher conversion rates, and noted that online sales now represents nearly 13 percent of total domestic revenue, up from 10.6 percent a year ago. The Company is now selling products into the Australian market.
Despite this revenue from the international division, was essentially flat, up 0.3 percent to $616 million, driven by a comp increase of 4 percent.
Net earnings fell 18 percent, to $188 million, due to a one-time windfall of $183 million last year, stemming from a CRT price-fixing settlement from vendors.
On the product front, top comp-sale gainers were gaming – likely driven by the March release of Nintendo’s Switch console – as well as connected home and computing.
The latter enjoyed a better-than-expected lift from mobile, spurred perhaps by last month’s launch of the LG G6 and Samsung Galaxy S8 flagship phones, while tablets continued their decline.
From a profit perspective, appliances and home theatre attained higher margin rates, but the benefits were partially offset by margin pressure in mobile and higher sales in the lower-margin gaming category, the company said.
Best Buy’s results exceeded its own and Wall Street’s forecasted revenue decline, sending its shares up 15 percent in morning trading.
“Our Q1 performance reflects the strength of our customer value proposition and continued momentum in the execution of our strategy,” Joly said. “We are energized about our opportunities and the strategy we are pursuing. We believe we are uniquely positioned to help our customers in meaningful way with our combination of multichannel assets, including our online, store and in-home capabilities.”