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Best Buy works omnichannel as Q1 strong, US online sales top $1 billion

Best Buy put up stronger-than-expected first quarter results, as the company navigated the omnichannel retailing landscape better than most retailers.

Best Buy reported first quarter e-commerce revenue topping $1 billion as its results handily topped estimates on the strength of mobile sales.

The electronics retailer is closely watched because it is a brick-and-mortar player competing with Amazon and plays in a retail market that has been decimated with store closings.

Nevertheless, Best Buy is faring well and continues to prove it can play the omnichannel game well. In recent quarters, Best Buy has put more investment into its data strategy and digital marketing efforts.

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Best Buy reported fiscal first quarter revenue of $8.53 billion with same store sales increasing 1.6 percent. Earnings for the first quarter were 60 cents a share. Wall Street was looking for earnings of 40 cents a share on revenue of $8.44 billion with same store sales declining 1.8 percent.

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CEO Hubert Joly noted that gaming and mobile sales were strong and the delay of tax refund checks boosted results. Joly added that in-store pickups were also becoming a meaningful e-commerce value proposition. In the US, first quarter online revenue of $1.02 billion accounted for 12.9 percent of Best Buy domestic revenue. It was the first non-holiday quarter where US online sales topped the $1-billion mark.

On a conference call with analysts, Joly said:

  • Best Buy will offer smart home services in 400 stores by the holidays. He said:
Guided by in-store experts, customers select from a suite of leading smart home products, including smart locks, lights, cameras, thermostat, and more, and get expert installation, app-based system control and a 24/7 professional-monitoring service. Also, in the smart home area, we are curating new product categories across the home. For example, we launched during the quarter a new smart nursery assortment. More broadly, we're very focused on the smart home as a key part of our Best Buy 2020 strategy, and we will continue to enhance this category across our website and our stores this year.
  • The company is refining its mobile sales experience. Joly noted that for "the new phone launched last month," also known as the Samsung Galaxy S8, Best Buy simplified the buying experience.
  • Best Buy is integrating more with vendors to improve inventory availability and optimizing its supply chain.
  • Best Buy is investing in a new warehouse management system and beginning to improve its customer relationship management tools starting with its in-home advisors, which will be a sales-consulting-smart home advisory hybrid service.
  • And there will be more automation of processes ahead. Corie Barry, CFO of Best Buy, said:
As we invest in things like in-home adviser and some of those more complex, interpersonal conversations, we believe there's real opportunity to take waste out of the system through automation, and there are places like our supply chain, there are places like some of our call centers, where we believe we have real opportunities to become more automated, and we've talked about this before. With the retail landscape evolving so quickly, many times you're putting in stop caps as quickly as you can, and you're not thinking about how to streamline it or how to automate it. You're just thinking about how to get it done and get it implemented. And now what we're finding is when you take the time to step back, get a really smart group of people together and look at how could we do this better, how could we automate it, that's the place where we're starting to see some real opportunity.

As for the outlook, Best Buy said second quarter revenue will be between $8.6 billion and $8.7 billion with sames store sales up 1.5 percent to 2.5 percent. Earnings for the second quarter will be 57 cents a share to 62 cents a share on a non-GAAP basis.

For fiscal 2018, Best Buy is projecting revenue growth of 2.5 percent with operating income growth of 3.5 percent to 8.5 percent. Fiscal 2018 has an extra week relative to fiscal 2017.

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