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OZ CE & Appliance Retailers Can Take Heart From Latest Best Buy Results

Australian consumer electronics and appliance retailers looking for light at the end of the tunnel after the arrival of Amazon have to look no further than the latest results from US retailer Best Buy where consumers are flocking to bricks and mortar stores to make a purchase.

The Company that has been under siege from Amazon, has reported a 14% jump in revenues to $15.36 billion, beating estimates for $14.5 billion. Online sales jumped 17.9 percent in the US from a year ago, accounting for $2.8 billion of business in the quarter, or about 20 percent of Best Buy’s total revenue.

Like JB Hi Fi the Company is suffering from margin pressure with profits falling to $364 million, or $1.23 per share, in the quarter, from $607 million, or $1.91 per share, a year earlier.

A key contributor to the Companies sales lift was a big increase in demand for gaming products along with an increase in demand for services.

On the downside Best Buy announced it will shut all 250 of its small mobile stores across the US by May 31st.

The stores reportedly contributed only a little over 1 percent to the company’s overall revenue. The closures won’t affect Best Buy’s mobile stores in Canada, and the company will continue to sell mobile phones both online and in its “big-box” stores.

Best Buy began opening the dedicated mobile phone outlets about 10 years ago, before the first iPhone was released. The mobile stores are tiny, averaging 1,400 square feet — compared to full-size stores, which average 40,000 square feet. Best Buy’s mobile shops are also competing with wireless carriers who have their own high street stores as well as Apple and online retailers like Amazon.

Best Buy Chief Financial Officer Corie Barry said the result was “extremely encouraging”.

Shares rose 2.2 percent to $74 in early trading.

Best Buy’s sales at established stores climbed 9 percent in the fourth quarter ended Feb. 3, nearly triple analysts’ average expectation for a 2.9 percent increase, according to Consensus Metrix.

“The roughly $2 billion overall revenue increase speaks to the strength of Best Buy’s brick-and-mortar footprint, as well as reinforces our view that consumers still value the store experience,” said Moody’s retail analyst Charlie O’Shea.

The company has tried to turn itself around by matching online retailer Amazon’s low prices, closing underperforming stores, and improving customer service.

The performance continues to be a reversal for a company that had struggled with plunging sales and shrinking profit about six years ago as consumers browsed at brick-and-mortar stores but made purchases online, a practice called showrooming.

Some of Best Buy’s competitors, like RadioShack and Hhgregg, have closed hundreds of stores and filed for bankruptcy protection.

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