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Best Buy Shares Surge 17% ‘Fortnite’ Gaming A Big Contributor

US CE retailer Best Buy claims that the surging popularity of the “Fortnite” videogame, has spurred purchases of headphones and other accessories a move which JB Hi Fi is also witnessing in Australia.

Facing tough competition from Amazon Best Buy was still able to increase sales by 4.8%, its fifth consecutive year of growth, comparable sales grew 3%. The surge in sales saw Best Buy shares climb 17% on the news.

The retailer said profit in the fourth quarter was $735 million, or $2.69 a share, up from $364 million, or $1.23 a share, from a year ago. Revenue fell 3.7% to $14.8 billion in the quarter, which had one less week than the same period a year earlier. The company estimates an extra week in the previous year added about $760 million in revenue for the fourth quarter of 2018.

“All of our channels are growing,” Best Buy Chief Executive Hubert Joly said on a media call last night. “We continue to see a favourable consumer environment.”

The company said it benefited more than it expected from the popularity of the “Fortnite” videogame, which Chief Financial Officer Corie Barry called a “phenomenon” that “lifted all boats in gaming,” from consoles to headphones.

She also said strong sales growth in gaming, wearables, appliances and the smart-home category offset weaker-than-expected demand for mobile phones.

Mr. Joly said he expects the company to benefit from the rise of 5G and other new technologies such as foldable smartphones, though he said the effect of the new foldable phones would be limited in the short-term due to their high price points.

In what could be a blueprint for CE and appliance retailers in Australia Best Buy executives said that they turned around their fortunes in recent years by matching prices, offering more services and using stores to fulfil online orders.

It has also been picking up market share in appliances and electronics from competitors, such as Sears which have been forced to close store

Best Buy has also been adding services, such as technical support and in-home advisers, to lessen its reliance on new gadget releases. Last year, the company agreed to acquire GreatCall the maker of senior-focused Jitterbug mobile phones, for $800 million.

On Wednesday, Best Buy said it is currently in pilot programs with a number of managed-care organizations to expand its health-monitoring services for aging consumers. It is also testing leasing programs in some markets to attract consumers that might not otherwise be able to buy certain products.

Best Buy said it expects comparable sales to grow 0.5% to 2.5% for fiscal year 2020. The retailer estimates adjusted earnings per share of $5.45 to $5.65 for the full year.

All financial numbers are in US dollar.

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