Big CE Retailer Wobbles Move To Tip Dollars Into Online & Same Day Delivery
After a stellar first quarter that saw JB Hi Fi and The Good Guys sales surge as COVID-19 demand kicked in global indications are that demand for consumer electronics and appliances are slowing due in part to a shortage of stock and closed stores.
Overnight giant US CE retailer Best Buy reported a softening of the market that saw the retailer report an overall revenue fall of 6.3%.
The company’s shares, which have gained nearly 60 percent in the last two months, fell nearly 4 percent in afternoon trading, to $78.32.
Last month JB Hi-Fi has posted strong March quarter growth as customers forced to work from home rushed to buy home appliances and technology products before COVID-19-related social restrictions were brought in.
The electronics and appliances retailer saw an 11.3 per cent increase in comparable sales for the three months to March 31 sales at JB Hi Fi owned retailer The Good Guys which focuses on electrical and home appliances, rose 13.9 per cent during the three-month period.
Best Buy said it expects profit margins to be under pressure in the second quarter, as it spends more on expanding delivery services to support a surge in online shopping from people staying at home due to the COVID-19 pandemic.
Neither JB Hi Fi or Harvey Norman have said how much they are spending on expanding their online operations as consumers flock to online stores over the traditional store.
Best Buy said it was also ramping up its same-day delivery services, as people stuck at home under lockdown restrictions shop more for monitors, printers and other work-from-home equipment, as well as gaming consoles.
Online sales made up about 42 percent of Best Buy’s first-quarter domestic revenue of $7.92 billion, compared with just a 15 percent share a year earlier.
“We expect that our online sales will continue to be high as a percentage of overall sales in the second quarter, which will continue to pressure the gross profit rate,” Chief Financial Officer Matthew Bilunas said on a call with analysts.
Best Buy’s overall revenue fell 6.3 percent, to $8.56 billion, in the quarter ended May 2, but beat analysts’ expectations of $8.16 billion, according to IBES data from Refinitiv. Quarterly same-store sales fell 5.3 percent.
The company, which furloughed 51,000 hourly US store employees last month, said net earnings fell 40 percent, to $159 million.
Excluding one-time items, the company earned 67 cents per share, more than analysts’ average estimate of 44 cents per share.
The company maintained its quarterly cash dividend of 55 cents per share and said about 700 of its stores were open for customers on an appointment basis.