Despite the tough economy, Best Buy says its fourth-quarter numbers came in at the high end of its expectations -- results its CEO says prove that consumers place a premium on technology and connectivity. Strong sales of laptops and TVs demonstrate that "staying connected has become non-negotiable -- people have little or no tolerance of things that are not working the way they should," Brian Dunn, CEO of Best Buy, told investors on a conference call.
Net earnings for the Minneapolis-based retailer rose to $779 million in its fiscal fourth quarter, from $570 million in the same period a year ago. Revenue, fueled by low-double-digit increases in notebook computers and a high-single-digit increase in flat-panel televisions, increased 12% to $16.6 billion, compared with revenue of $14.7 billion for the fourth quarter of fiscal 2009, including a comparable-store sales gain of 7%, driven by an increase in average ticket size.
In the U.S., the company also says that there was a low-double-digit increase in mobile phones, and a low-double-digit decline in music and movies.
Dunn says the company is keenly aware that consumer demands and behavior surrounding technology are shifting. "We are building on our foundation as a company that sells hardware and accessories," he says, "to one that understands that means we can connect people to the people, content and networks they care about." He adds that the sale of each connectable device is an opportunity to create a longer relationship with the customer.
The company says it also is expanding its Connectivity Center concept in many of its stores -- which are organized to demonstrate the performance of digital devices, including TVs, computers and mobile phones, and show how they can use a wide variety of content. "Many of these services are invisible, and we need to show consumers what they can do," Dunn says. "The vast majority of sales in these centers are incremental, and are not having cannibalization effect." He says they are also scoring well with women, "and that is very, very encouraging."
"We also scrubbed our advertising plans, making sure we understand where our customers are, but also where they are going," he says, expanding its use of social media platforms, including Facebook and Twitter. He was also bullish on online sales, which grew by 20% in the quarter, "with in-store pickup approaching 40% of total online sales, showing the power of being a multichannel retailer."
Executives also say that while 3D TV sets have only been in stores several weeks, they are encouraged by consumer interest. "It shows that the interest for this home theater experience continues to evolve," Dunn says, "and consumer appetite for innovation is very strong."
International revenue gained 15% for the quarter to $4 billion, including a comparable-store sales increase of 5.5%.
In the year ahead, the company predicts revenue of between $52 billion and $53 billion -- an increase of 5 to 7%, based on a comparable-store sales increase of 1 to 3%.