Best Buy Battles Back Against Amazon

While it’s been a season of drab numbers for most retailers, Best Buy lit up the second-quarter scoreboard, beating both sales and profit expectations. 

Comparable-store sales jumped 5.4%, and sales on its website rose 31.2%, driven by successful marketing and consumers’ strengthening appetite for tech. And the Minneapolis-based retailer upped its forecast for the full year, and now expects same-store sales result to advance 4%, rather than the 2.5% it initially predicted. It expects third-quarter sales to grow between 4.5 and 5.5%.

In the U.S., computing, wearables, smart home, mobile phones and appliances all sold well. (Its appliances are also winning it accolades from J.D. Powers.) Tablet sales declined.

The news was especially happy for those in the industry who’ve lamented that consumers are increasingly buying tech and electronic purchases online, at the expense of chains like Best Buy. (Rival HH Gregg filed for bankruptcy earlier this year.)



But Hubert Joly, Best Buy chairman and CEO, cautioned investors in a conference call that the extra-healthy results are “not the new normal,” and some analysts were quick to agree.

“The retailer's management is doing a good job in making the firm relevant to vendors and customers,” writes R.J. Hottovy, who follows the company for Morningstar, in his report. “But current growth rates can't be sustained over the long term.” While looming product smartphone launches may support that level of growth for the rest of the year, “over a longer horizon, we think low-single digit comp growth is more reasonable as current product cycles normalize, the industry consolidates, and vendors increasingly take their products directly to consumers.”

Others see it differently, and believe Best Buy’s ability to blend online convenience with the ability to explore products in its stores, interacting with associates,  give it an advantage over pure e-commerce brands. 

Best Buy’s hefty numbers challenge “the oft-repeated fiction that retailers of its ilk will struggle to survive in the era of Amazon,” writes Neil Saunders, managing director of GlobalData Retail, in his report on Best Buy’s earnings.

“From our customer data, it is also clear that there are large groups of customers who feel more confident buying online from Best Buy than other e-commerce only merchants, mainly because Best Buy has stores where they can seek advice, resolve problems, and return items if needed.” He says this is especially true for larger purchases, such as appliances and TVs. “In this sense, Best Buy's multichannel model is proving to be a core strength.”

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