The good news is Best Buy is profitable and it is increasing its online sales.
The bad news is that same store sales for the US declined 2 percent in the recent quarter, and they are expected to continue to see low single digit declines over the next two quarters, despite the expected launch of the iPhone 6 this fall.
Best Buy has been hit by the overall trend at retail of slower growth in consumer electronics and a shift to online retailing.
In a conference call on Tuesday, analysts repeatedly asked CEO Hubert Joly if the launch of the iPhone 6 wouldn’t cause a big boost for the retailer.
Joly explained, “We look forward to the launch,” but he said, “In the initial weeks there’s limited inventory. In phones in the US, we have to keep in mind that in the last five years you’ve seen a rapid increase in smartphone sales, and they’ve reached a penetration of about 70 percent. Ninety percent of the new phones being sold are smartphones. ….So expecting a huge lift is not something we’ll contemplate.”
Best Buy’s online sales in the recent quarter improved 22 percent bringing its online sales as a share of its total sales to 7.7 percent up from 6.1 percent. For other retailers a more typical percentage share of CE sales online is in the low teens and that is where Best Buy aims to be.
A bright spot for the retailer is that it’s made strides in moving inventory between the stores (a Blue Shirt can now see what inventory is at other stores, not just what’s in the warehouse) and it has made strides in online sales shipped from stores. It’s also now moving more of its open box inventory from product returns via the web.
That helped Best Buy achieve profits of $146 million on lower sales of $8.9 billion for the quarter. Still that’s a 41 percent drop in profits compared to last year when the company reported a $248 million net income on sales of $9.2 billion.
Sales of UltraHD TV sales are going well but high prices will prevent any meaningful holiday buying surge this year, said Joly, who predicts that UltraHD will be a big seller for Christmas in 2015 and 2016.
The takeaway from Best Buy’s reporting on Tuesday was not to expect a rip roaring Q4 for the retailer.
For more on Best Buy’s results click here and here.
