Best Buy rides iPad 2 wave, eyes tablet inflection point

Best Buy CEO Brian Dunn said the biggest catalyst in its fiscal first quarter was the launch of Apple's iPad and that rival tablets are about to hit an inflection point.

Best Buy CEO Brian Dunn said the biggest catalyst in its fiscal first quarter was the launch of Apple's iPad and that rival tablets are about to hit an inflection point. The company reported earnings of $137.2 million, or 35 cents a share, on revenue of $10.94 billion for its fiscal first quarter. Wall Street was looking for earnings of 33 cents a share on revenue of $10.71 billion.

Nevertheless, Best Buy's same-store sales were down 1.7 percent in the first quarter compared to a year ago. The company reiterated its fiscal 2012 outlook with non-GAAP earnings of $3.30 a share to $3.55 a share and revenue between $51 billion and $52.5 billion.

Dunn touted a new retail layout called Tablet Central, which will appear in all stores at the beginning of July. The CEO added:

The tablet space is heating up now and our vendor partners are aggressively advertising to build awareness. So we expect to see the number of tablets ramp up quickly in this quarter. We are excited about the variety of models we will offer, complete with a wide range of features and price points that will drive consumer interest, as well as our business.

Best Buy executives danced around a question about how iPad 2 rivals were performing in stores. Executives were asked whether Best Buy was getting a higher allocation of iPad 2 models and whether rival devices were selling. Best Buy is selling what iPad 2s it gets, but declined to get specific about non-iPad tablets like Research in Motion's Playbook, Samsung's Tab and Motorola's Xoom.

Other key details from Best Buy on the consumer electronics front:

  • Best Buy Mobile was boosted by the Verizon iPhone and 4G phones like the HTC Inspire and Samsung Epic.
  • Dunn is determined to close the e-commerce gap with Amazon. He said:

We are determined to double our US online business in the next three to five years, and as I mentioned, our online revenue grew double digits in Q1. Our business in this channel strengthened throughout the quarter as we started to ramp up many new activities to drive traffic, including the significant expansion of our online assortment. This is a key component to improving our competitive position online and we have made good progress to date, adding over 10,000 SKUs online since Q1 of last year.

  • Consumer interest in e-readers was strong as same store sales were up triple digits in that category. The revenue remains small in dollar terms.