Best Buy delivered strong second quarter results, but its outlook for the third quarter was a bit light.
Like other retailers that have navigated the bricks-to-clicks transition, Best Buy delivered same store sales that highlighted a strong economy.
The company reported second quarter earnings of 86 cents a share on revenue of $9.38 billion, up 4.9 percent from $8.94 billion a year ago. Non-GAP earnings were 91 cents a share. Wall Street was expecting non-GAAP earnings of 82 cents a share on revenue of $9.27 billion.
Same store sales were up 6.2 percent in the second quarter. Best Buy has delivered same store growth north of 4 percent for five straight quarters. Best Buy hasn't delivered second quarter same store sales this strong since fiscal 2004. Second quarter online revenue was $1.21 billion, up 10.1 percent from a year ago. Digital sales are 14 percent of Best Buy's total revenue.
As for the outlook, Best Buy said it expects fiscal 2019 same store sales growth of 3.5 percent to 4.5 percent compared to its previous projection of flat to 2 percent. Non-GAAP earnings will be $4.95 a share to $5.10 a share compared to its previous outlook of $4.80 a share to $5.00 a share. Wall Street was looking for fiscal 2019 non-GAAP earnings of $5.02 a share. Total revenue for fiscal 2019 will be $42.3 billion to $42.7 billion above estimates of $42.33 billion.
The third quarter outlook was a bit mixed. Best Buy projected revenue of $9.4 billion to $9.5 billion with non-GAAP earnings of 79 cents a share to 84 cents a share. Wall Street was expecting 92 cents share in earnings for the third quarter on revenue of $9.49 billion.
CFO Corie Barry said that the company's quarterly earnings won't be linear given that it is investing in its Best Buy 2020 strategy. In a nutshell, Best Buy sent more cash to the bottom line in the second quarter, but will choose to invest more in the third quarter. Retailers typically don't make big investments in the fourth quarter when they have to execute during the holiday season.
"We remain focused on managing the business for long-term success rather than ensuring a straight-line quarterly operating income rate performance," said Barry.
CEO Hubert Joly said that Best Buy's second quarter results benefited by an overall "favorable environment" and the company's retooling to focus on services and experiences in store.
On a conference call, Joly said that Best Buy is investing to increase capacity in the supply chain, improving the online experience and building out its Total Tech Support offering and In-Home Advisor program. Services are viewed as a big growth opportunity for Best Buy. Joly said:
Another highlight of the quarter is the continued expansion of our In-Home Advisor program. Based on the strength of demand, we've increased the number of advisers from 300 in September last year at the beginning of the nationwide launch to more than 430 at the end of the second quarter. As a reminder, our In-Home Advisors provide free, In-Home consultations to help customers address their needs across our full range of products and services. The goal of the program is that the initial consultation is the beginning of a deeper and more relationship-based experience with Best Buy over the long term.
Like our Total Tech Support offer, we are early in the journey and expect the program to continue to improve and mature as our advisors and their roles longer and master a sophisticated skills. And as we further enhance, the of the tools and systems that help them do their job.
In the U.S., Best Buy saw strong sales in home theater, computing, appliances, gaming, mobile phones and smart home. Digital imaging and tablets saw weaker demand.
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